BUSINESS ETHICS AND BUSINESS ETHICS AND NORMATIVE NORMATIVE PHILOSOPHYPHILOSOPHY11)PHILOSOPHICAL FOUNDATION)PHILOSOPHICAL FOUNDATION

OF BUSINESS ETHICSOF BUSINESS ETHICS Philosophical and Moral standards provide tools for Philosophical and Moral standards provide tools for

judging the moral value of a decision. Moral judging the moral value of a decision. Moral standards are the yardsticks of business ethics. standards are the yardsticks of business ethics.

According to David Fritzsche, ‘’business ethics is the According to David Fritzsche, ‘’business ethics is the process of evaluating decisions, either pre or post, process of evaluating decisions, either pre or post,

with respect to the moral standards of society’s with respect to the moral standards of society’s culture.” In order to evaluate decisions, we need a culture.” In order to evaluate decisions, we need a

tool box of moral standards. tool box of moral standards.

INTRODUCTIONINTRODUCTION Managers will evaluate the moral dimensions Managers will evaluate the moral dimensions

of a decision before making it. The moral of a decision before making it. The moral yardsticks used to evaluate a decision yardsticks used to evaluate a decision consist of the moral standards of a society’s consist of the moral standards of a society’s culture. Business ethics involve the use of culture. Business ethics involve the use of moral standards when making decisions. moral standards when making decisions.

Moral standards consist of specific moral Moral standards consist of specific moral norms and general moral principle moral norms and general moral principle moral norms prohibit certain types of behaviour norms prohibit certain types of behaviour such as lying, stealing and killing. moral such as lying, stealing and killing. moral principles provide more general guidelines principles provide more general guidelines for behavior and are applicable to decision for behavior and are applicable to decision

normative theory of business normative theory of business ethicsethics

we shall use integrative social contracts theory as the foundation for evaluating the ethical we shall use integrative social contracts theory as the foundation for evaluating the ethical dimenslon 0f decisions. dimenslon 0f decisions.

Integrative Social Contracts TheoryIntegrative Social Contracts Theory is a normative theory of business ethics and it allows is a normative theory of business ethics and it allows for moral diversity among various cultures while maintaining certain universal norms.for moral diversity among various cultures while maintaining certain universal norms.

A social contract is an informal agreement regarding behavioural norms that are developed A social contract is an informal agreement regarding behavioural norms that are developed from shared goals beliefs and attitudes of groups of people. Corporations enhance the from shared goals beliefs and attitudes of groups of people. Corporations enhance the welfare of society through the satisfaction of consumer and interest of workers by leveraging welfare of society through the satisfaction of consumer and interest of workers by leveraging corporations· special advantages.This is the moral foundation, Social Contract also serves as corporations· special advantages.This is the moral foundation, Social Contract also serves as a tool to measure the performance of productive organisations. When such organisations a tool to measure the performance of productive organisations. When such organisations fulfil the terms of the contract, they are morally justified. when they do not, they should be fulfil the terms of the contract, they are morally justified. when they do not, they should be condemned. hyper norms are universal and impose certain conditions on all busines condemned. hyper norms are universal and impose certain conditions on all busines 1”lIfied. When they do not, they should be condemned. · Hyper- norms are universal and 1”lIfied. When they do not, they should be condemned. · Hyper- norms are universal and impose certain conditions on all business activity. The macro-social contract functions at impose certain conditions on all business activity. The macro-social contract functions at the global level, provided specific conditions under which micro- -social contracts may be the global level, provided specific conditions under which micro- -social contracts may be developed. Micro-social contracts are community Contracts developed o guide business developed. Micro-social contracts are community Contracts developed o guide business activity.The essential elements of Social Contracts Theory are shown :activity.The essential elements of Social Contracts Theory are shown :

HYPER NORMSHYPER NORMS 1. Personal freedom 1. Personal freedom 2. Physical security 2. Physical security 3. Political participation 3. Political participation 4 . Informed consent 4 . Informed consent 5. Ownership of property 5. Ownership of property 6. Right to subsistence 6. Right to subsistence 7. Equal dignity to all humans. 7. Equal dignity to all humans.

Macro Social Contract Macro Social Contract

1. Moral free space 1. Moral free space 2. Free consent with right to exist 2. Free consent with right to exist 3. Compatible with hypemorms3. Compatible with hypemorms 4. Priority levels. 4. Priority levels.

Micro Social Contract Micro Social Contract

Individual Norms Individual Norms 1. Do not lie in negotiations 1. Do not lie in negotiations 2. Honour all contracts 2. Honour all contracts 3. Give job preference to natives 3. Give job preference to natives 4. Give contract preference to local 4. Give contract preference to local

supplierssuppliers 5. Provide a safe work place5. Provide a safe work place

Application of hyper normsApplication of hyper norms

Hypenorms are universal norms that are equally Hypenorms are universal norms that are equally applicable to all persons worldwide. applicable to all persons worldwide.

· Hypernorms provide the basis for evaluating all · Hypernorms provide the basis for evaluating all other norms. They stand for the basic principles other norms. They stand for the basic principles that are fundamental to human existence , e.g. that are fundamental to human existence , e.g. human rights,human rights,

ownership of property, right to live etc. ownership of property, right to live etc. Macro-social contract provides global norms Macro-social contract provides global norms

(hypenorms) (hypenorms) micro-social contracts provide community norms. micro-social contracts provide community norms.

MORAL REASONING MORAL REASONING THEORIESTHEORIES

Moral reasoning deals with determining rightness of the acts. Moral reasoning deals with determining rightness of the acts. It tells about what individuals or institutions ought to do. It tells about what individuals or institutions ought to do. Moral theories deal with two components : Moral theories deal with two components :

I. Theory of value or theory of good : It decides about what is I. Theory of value or theory of good : It decides about what is good or valuable. Though it does not make this explicit. It good or valuable. Though it does not make this explicit. It focuses on properties that we want to be realised in our focuses on properties that we want to be realised in our actions. These properties may be compliance with law of actions. These properties may be compliance with law of nature. Human freedom’, social solidarity or a combination of nature. Human freedom’, social solidarity or a combination of one or more of them. one or more of them.

2. Theory of the right: It does not tell about which properties 2. Theory of the right: It does not tell about which properties are valuable tells about what individuals and institutions are valuable tells about what individuals and institutions should do by responding to valuable properties. should do by responding to valuable properties.

Based on the above, there are two kinds of moral theories: Based on the above, there are two kinds of moral theories: I. Consequentialist or teleological theories I. Consequentialist or teleological theories 2. Non-consequentialist or non-teleological/deonto!ogical 2. Non-consequentialist or non-teleological/deonto!ogical

TheoriesTheories While teleology is the ethics of ends and consequences, While teleology is the ethics of ends and consequences,

deontology is the ethics of duty and obligations. deontology is the ethics of duty and obligations.

Teleological ethics Teleological ethics Teleological ethics deals with consequential ism. It is associated with Teleological ethics deals with consequential ism. It is associated with

utilitarianism, ethical egoism and utilitarianism, ethical egoism and other goalbased approaches to consequentialism. These theories emhasise other goalbased approaches to consequentialism. These theories emhasise

on goals and ends in determining moral quality of conduct and character. on goals and ends in determining moral quality of conduct and character. It refers to the rightness of actions or moral ‘values of character. It uses It refers to the rightness of actions or moral ‘values of character. It uses ends and goals to justify virtues and actions. ends and goals to justify virtues and actions.

· “Teleological theories hold that rightness or wrongness of action is always · “Teleological theories hold that rightness or wrongness of action is always determined by its tendency to produce certain consequences which are determined by its tendency to produce certain consequences which are intrinsically good or bad”. The assert that right actions are those that intrinsically good or bad”. The assert that right actions are those that have the best consequences. They give priority to ‘good’ over ‘right’. have the best consequences. They give priority to ‘good’ over ‘right’. According to them, all actions that maximise the good are right actions. According to them, all actions that maximise the good are right actions. What is good is independent of what is right. What is good is independent of what is right.

Teleological theories provide different views on what is good that should be Teleological theories provide different views on what is good that should be promoted. According to egoistic theories, good is the good of the person promoted. According to egoistic theories, good is the good of the person who is acting. According to universalistic theories. Good is the good of all who is acting. According to universalistic theories. Good is the good of all those who are affected by an action. Utilitarianism or universalistic is the those who are affected by an action. Utilitarianism or universalistic is the best known teleological theory. Jeremy Bentham, Johan Stuart Mill and best known teleological theory. Jeremy Bentham, Johan Stuart Mill and Henry Sidgwick were the famous utilitarianists who asserted that actions Henry Sidgwick were the famous utilitarianists who asserted that actions should be judged on the basis of the amount of pleasure they produce on should be judged on the basis of the amount of pleasure they produce on all those who are affected by those actions. all those who are affected by those actions.

Features of Teleological Features of Teleological Theories Theories

I. It gives priority to what is ‘good’ over what is ‘right’. Good is the purpose or I. It gives priority to what is ‘good’ over what is ‘right’. Good is the purpose or goal of human actions. Human actions should bring greatest happiness for goal of human actions. Human actions should bring greatest happiness for greatest number of people. greatest number of people.

2. All actions that contribute to ‘good’ are moral actions. An action that brings 2. All actions that contribute to ‘good’ are moral actions. An action that brings happiness for the greatest number of people,is a right actionhappiness for the greatest number of people,is a right action

3. Results or consequences determine the rightness ; or wrongness of moral 3. Results or consequences determine the rightness ; or wrongness of moral actions.actions.

:One of the important teological theories is that of consequentialism. :One of the important teological theories is that of consequentialism. Consequentialism, thus, focuses on best consequences of Our actions for all Consequentialism, thus, focuses on best consequences of Our actions for all

concerned. It holds that makes an action right or wrong is its consequences concerned. It holds that makes an action right or wrong is its consequences only. This theory became popular in the 18only. This theory became popular in the 18thth century. century.

Forms of Consequentialism (Consequential Theories) Forms of Consequentialism (Consequential Theories) 1. Theory of ethical egoism : In this form of consequentialism,the desired is the 1. Theory of ethical egoism : In this form of consequentialism,the desired is the

long-term self-interest 0f f the individual. It claims that whi1e making a moral long-term self-interest 0f f the individual. It claims that whi1e making a moral decision one should consider the long term self –interest of the decision. Short-decision one should consider the long term self –interest of the decision. Short-term Short-tenn self.interest, if any, should be sacrificed for sake of long-term term Short-tenn self.interest, if any, should be sacrificed for sake of long-term self-interest. · An action is morally right if the consequences of that action are self-interest. · An action is morally right if the consequences of that action are more favourable than unfavourable. Only to the agent performing that action. more favourable than unfavourable. Only to the agent performing that action.

2. Utilitarianism: In this form of consequentialism, the desired end is not long-term 2. Utilitarianism: In this form of consequentialism, the desired end is not long-term self-interest of the individual but, it is greatest happiness to the greatest self-interest of the individual but, it is greatest happiness to the greatest number. Any action that brings greatest happiness to the greatest number of number. Any action that brings greatest happiness to the greatest number of people is a desirable action and should be performed. Advocates of this people is a desirable action and should be performed. Advocates of this thinking are Jeremy Bentham and John Stuart Mill. thinking are Jeremy Bentham and John Stuart Mill.

a. Bentham’s Approach to a. Bentham’s Approach to Utilitarianism Utilitarianism

Bentham advocates adopting an action that brings Bentham advocates adopting an action that brings happiness or pleasure to the community rather than an happiness or pleasure to the community rather than an individual. He judges pleasure by quantity. individual. He judges pleasure by quantity. One action is One action is better than the other if, it brings more happiness or better than the other if, it brings more happiness or pleasure than the other. He says that pleasure can pleasure than the other. He says that pleasure can be measured by its intensity, duration, certainty or be measured by its intensity, duration, certainty or uncertaintyuncertainty..

In determining whether an action is moral or not, In determining whether an action is moral or not, the ‘intention of the doer’ and ‘consciousness of the ‘intention of the doer’ and ‘consciousness of consequences’ need to be taken into accountconsequences’ need to be taken into account. . Consequences can be both primary and secondary. For Consequences can be both primary and secondary. For example, non payment of tax by ‘A’ resulting in loss to the example, non payment of tax by ‘A’ resulting in loss to the State revenue is primary consequence of A’s action. If this State revenue is primary consequence of A’s action. If this leads to nonpayment of tax by others also causing mere leads to nonpayment of tax by others also causing mere harm to State exchequer, A’s action is assumed to have harm to State exchequer, A’s action is assumed to have secondary consequences which are, in fact, doing more secondary consequences which are, in fact, doing more harm to State exchequer. harm to State exchequer.

Limitations of the approachLimitations of the approach

Bentham’s theory has the following Bentham’s theory has the following limitations: limitations:

1. All actions are not followed by 1. All actions are not followed by pleasures. A soldier’s action to join army is pleasures. A soldier’s action to join army is because of his ideals and not pleasant because of his ideals and not pleasant consequences. consequences.

2. He, more or less talks of quantitative 2. He, more or less talks of quantitative pleasures. Many qualitative factors that pleasures. Many qualitative factors that affect moral actions are not taken into affect moral actions are not taken into account. account.

Mill’s Approach to Mill’s Approach to Utilitarianism Utilitarianism

J.S. Mill, a political thinker, published his work J.S. Mill, a political thinker, published his work ‘Utilitarianism’ in 1863,‘Utilitarianism’ in 1863,

1. He said that pleasures differ in quantity as well as 1. He said that pleasures differ in quantity as well as quality. Some pleasures are more desirable than others. quality. Some pleasures are more desirable than others. Man should pursue those actions whose pleasures are Man should pursue those actions whose pleasures are noble and dignified. He said, “It is better to be a human noble and dignified. He said, “It is better to be a human being dissatisfied than a pig satisfied.” being dissatisfied than a pig satisfied.”

He views morality as internal and not external. Morality He views morality as internal and not external. Morality regards pleasures and pains of others and not just one’s regards pleasures and pains of others and not just one’s own self. It is the desire to be in unity with others.own self. It is the desire to be in unity with others.

The principle of utility as outlined by John Stuart Mill is that The principle of utility as outlined by John Stuart Mill is that one is obligated morally to produce the greatest good for one is obligated morally to produce the greatest good for the greatest number. Mill identified the good with utility. In the greatest number. Mill identified the good with utility. In calculating whether an action is right or wrong one needs calculating whether an action is right or wrong one needs to project the total consequences for good or ill and to project the total consequences for good or ill and determine the actions in which it is optimised according to determine the actions in which it is optimised according to situation. situation.

Deontology theory of ethicsDeontology theory of ethics Deontology is a theory of ethics advocated by philosophers such as Kant, Deontology is a theory of ethics advocated by philosophers such as Kant,

Ross and John Rawls.Ross and John Rawls. This theory considers actions to be right or wrong regardless of their consequences. This theory considers actions to be right or wrong regardless of their consequences.

Actions that have moral values are right; whether or not they are good. If telling lies is Actions that have moral values are right; whether or not they are good. If telling lies is morally wrong; it remains wrong even if it brings happiness to same people. Actions are, morally wrong; it remains wrong even if it brings happiness to same people. Actions are, thus, right or wrong depending on whether they are morally right or wrong. Irrespective thus, right or wrong depending on whether they are morally right or wrong. Irrespective of their consequences. What is ‘right’ has priority over what is ‘good’.of their consequences. What is ‘right’ has priority over what is ‘good’.

Deontology is derived from the Greek word ‘deon’, which means obligation or duty. It Deontology is derived from the Greek word ‘deon’, which means obligation or duty. It stresses on what is obligatory and what one ought to do, whether or not it is good to do stresses on what is obligatory and what one ought to do, whether or not it is good to do so. Speaking truth may not bring good to some but, one must speak the truth as it is so. Speaking truth may not bring good to some but, one must speak the truth as it is the moral duty of each good to some but, one must SpeaK the truth.the moral duty of each good to some but, one must SpeaK the truth.

There are two approaches to deontology: There are two approaches to deontology: 1. 1. Act deontologyAct deontology- ;. For example. ‘In this not break my promise’ is an obligation that - ;. For example. ‘In this not break my promise’ is an obligation that

represents act deontology. represents act deontology. 2. Rule deontology2. Rule deontology-It claims that obligations and moral duties can be generalised. -It claims that obligations and moral duties can be generalised.

For example, ‘we must always keep our promises’ is all obligation that represents rule For example, ‘we must always keep our promises’ is all obligation that represents rule deontology. These values, actions or duties are fundamental and do not depend upon deontology. These values, actions or duties are fundamental and do not depend upon circumstances of particular situations. Actions are performed according to to rules and circumstances of particular situations. Actions are performed according to to rules and not circumstances. Kant. not circumstances. Kant.

Kant saysKant says That result and consequences should not guide our actions. Our actions That result and consequences should not guide our actions. Our actions should follow the moral law. should follow the moral law.

According to RossAccording to Ross, we should all follow our moral duties regardless of their , we should all follow our moral duties regardless of their consequences. ;. One moral principle can be sacrificed only for another moral principle: consequences. ;. One moral principle can be sacrificed only for another moral principle:

Johan Ra.wls Johan Ra.wls says that fairness is prior to goodness. Fairness of society’s rules is more says that fairness is prior to goodness. Fairness of society’s rules is more important than consequences of their rules. important than consequences of their rules.

DEONTOLOGY AT A GLANCEDEONTOLOGY AT A GLANCE

1. Rightness or wrongness of an action is 1. Rightness or wrongness of an action is determined by its morality and not its determined by its morality and not its consequences. consequences.

2 Prominent thinkers are Kant, - Ross and Rawls2 Prominent thinkers are Kant, - Ross and Rawls 3. They give priority to ‘right’ over . Good’ . 3. They give priority to ‘right’ over . Good’ . 4. Right action may not necessarily maxi mise 4. Right action may not necessarily maxi mise

the good. the good. 5. Right actions may , or may not , bring 5. Right actions may , or may not , bring

happiness. happiness. 6. They are the theories of ethics duty and 6. They are the theories of ethics duty and

obligation. obligation.

Teleological Theories at a Teleological Theories at a glanceglance

Rightness or wrongness of an action is Rightness or wrongness of an action is determined by its consequences. determined by its consequences.

, Prominent thinkers are Bentham and J.S. Mill, Prominent thinkers are Bentham and J.S. Mill They give priority to ‘good’ over ‘right’. They give priority to ‘good’ over ‘right’. Right action is that which maximises the good. Right action is that which maximises the good. 5. Right actions bring happiness to individuals 5. Right actions bring happiness to individuals

performing the action (egoist theory) or performing the action (egoist theory) or happiness to greatest number of people happiness to greatest number of people (utili1arianism) . (utili1arianism) .

6. They are the theories of ethics that deal 6. They are the theories of ethics that deal with goals and end results of actions. with goals and end results of actions.

Non-consequentialist theoryNon-consequentialist theory

The outcome of a specific decision is irrelevant The outcome of a specific decision is irrelevant and what matters is whether the decision is and what matters is whether the decision is ethical. The rules provide the guide to ethical ethical. The rules provide the guide to ethical decision-making. Unlike rule utilitarianism, these decision-making. Unlike rule utilitarianism, these rules are based on reason, not consequences. Non-rules are based on reason, not consequences. Non-consequentialist principles are either Rights consequentialist principles are either Rights Principles or Justice Principles. Principles or Justice Principles.

1. Rights Principles 1. Rights Principles Rights principles grant a person certain moral Rights principles grant a person certain moral

or human rights by virtue of being a human or human rights by virtue of being a human being. These rights are closely associated with being. These rights are closely associated with duties. It is one’s duty not to violate the rights of duties. It is one’s duty not to violate the rights of others just as ‘it’ is the duty of others not to violate others just as ‘it’ is the duty of others not to violate his rights. his rights.

Non-consequentialist theoryNon-consequentialist theory The development of moral rights is generally attributed to Immanuel Kant The development of moral rights is generally attributed to Immanuel Kant

(1724-1804), (1724-1804), He argues that an action is morally right only if you would be willing to He argues that an action is morally right only if you would be willing to

have everyone act the same way in a similar situation. have everyone act the same way in a similar situation. Kant’s second principle ·states, ‘Act so that you treat humanity, whether Kant’s second principle ·states, ‘Act so that you treat humanity, whether

in your own person, or in that of another, always as an end and never as a in your own person, or in that of another, always as an end and never as a means only. People should never be treated only as a means to an end but means only. People should never be treated only as a means to an end but as ends themselves. Thus when using people to accomplish your as ends themselves. Thus when using people to accomplish your purpose ,you have a duty to respect them as human beings’.purpose ,you have a duty to respect them as human beings’.

Kant considered this categorical imperative to be a moral law. It is an Kant considered this categorical imperative to be a moral law. It is an unconditional comm · To Kant, they ‘are absolute duties and a moral act is unconditional comm · To Kant, they ‘are absolute duties and a moral act is performed out of duty only. performed out of duty only.

Gerald Cavanagh has cited six rights that are basic to business activity. Gerald Cavanagh has cited six rights that are basic to business activity. These include: These include:

1. life and safety, 1. life and safety, 2. truthfulness, 2. truthfulness, 3. Privacy, 3. Privacy, 4. Freedom of conscience, 4. Freedom of conscience, 5. Free speech, 5. Free speech, 6. Private property. 6. Private property.

2. Justice Principles 2. Justice Principles

Associated with issues of rights, Associated with issues of rights, fairness, and Quality.fairness, and Quality.

A just act respects your rights. A just A just act respects your rights. A just act treats you fairly. Principles of act treats you fairly. Principles of justice may be divided into three justice may be divided into three types-types-

distributive justicedistributive justice retributive justice retributive justice and compensatory justice. and compensatory justice.

(a) Distributive Justice(a) Distributive Justice Society has many benefits and burdens that must be Society has many benefits and burdens that must be

distributed among its members · Benefits include income, distributed among its members · Benefits include income, wealth, jobs, education and leisure. Burdens include work, wealth, jobs, education and leisure. Burdens include work, taxes and social and civic obligations. The allocation of taxes and social and civic obligations. The allocation of benefits and burdens raises questions of distributive benefits and burdens raises questions of distributive justice. Allocation can be made on the basis of: justice. Allocation can be made on the basis of:

1. Equal shares to each person, 1. Equal shares to each person, 2. Based on need, 2. Based on need, 3) Based on effort,3) Based on effort, 4. Based on merit, 4. Based on merit, 5. Based on social contribution. 5. Based on social contribution. Most proponents agree that equals should be treated Most proponents agree that equals should be treated

equally and unequals should be treated unequally in equally and unequals should be treated unequally in proportion to the degree of their inequality. This inequality proportion to the degree of their inequality. This inequality must be based on relative differences among the parties. must be based on relative differences among the parties. This concept is referred to as the formal principle of justice This concept is referred to as the formal principle of justice

(b) Retributive Justice(b) Retributive Justice · Retributive justice is concerned with retribution · Retributive justice is concerned with retribution

or punishment for wrongdoing. The questions are or punishment for wrongdoing. The questions are when is it just to punish someone and what should when is it just to punish someone and what should be the nature punishment. According to Aristotle, be the nature punishment. According to Aristotle, a person is morally responsible · for his actions a person is morally responsible · for his actions unless he has been forced to take . That action or unless he has been forced to take . That action or is ignorant of the act’s negative consequences.A is ignorant of the act’s negative consequences.A person should not be held responsible If he is person should not be held responsible If he is unable to halt the wrongdoing due to personal unable to halt the wrongdoing due to personal inadequacy or powerful external forces. Just inadequacy or powerful external forces. Just punishment must also fit the crime. The severity of punishment must also fit the crime. The severity of punishment should be in proportion to the punishment should be in proportion to the magnitude of the crime. magnitude of the crime.

c) Compensatory Justice:c) Compensatory Justice:

Compensatory justice is concerned with Compensatory justice is concerned with compensating the party injured by the wrongful compensating the party injured by the wrongful act. Most people agree that the injured party act. Most people agree that the injured party should be returned to the condition that existed should be returned to the condition that existed before the injury. This includes necessary before the injury. This includes necessary medical treatment and services and goods that medical treatment and services and goods that are needed to rectify the injury. The are needed to rectify the injury. The compensation should be equal o the loss suffered compensation should be equal o the loss suffered by the injured party. However, problems occur by the injured party. However, problems occur when it is not possible to provide complete when it is not possible to provide complete compensation, for example, a life lost cannot be compensation, for example, a life lost cannot be restored. restored.