Introduction

Business ethics are not as complicated or abstract as one might think. A simple way to
evaluate whether or not a practice is ethical is to determine the ultimate effect of that
practice. For example, if the manager of a store paid his cleaning employee less than the
going rate to clean his store, knowing exactly what the going rate is, several things could
happen to damage the business. The employee could suffer serious financial implications or
the employee could leave and find another position where she does not feel exploited. The
subject of ethics is often considered abstract or relative by those who believe that rules do
not always apply to them. Rules and laws apply to everyone. It is unfortunate that some
employees in the upper echelons of the corporate ladder decide to act unethically, but it is a
fact of business and of life. For this reason, it is best for a business to be careful of who they
promote within their company.
Corporate responsibility is a phrase heavily used in the business world. Often mentioned to
enhance the image of an organization, corporate responsibility does have a true meaning.
Businesses that use energy efficient lighting and offer their employees a fair pay rate are
practicing corporate responsibility. Corporate responsibility is an integral part of business
ethics and should be practiced by all entities, whether large or small. Corporate responsibility
simply means that each individual within a company is practicing personal and professional
responsibility in a way that will benefit him and others
Business ethics as an academic field has two main functions. On the one hand it challenges
self-satisfied business people by inviting moral criticism and self-criticism of business
practices. On the other hand, business ethics is potentially helpful when it comes to
analyzing, handling and preventing conflict in business contexts, with a focus on moral
aspects.
Two schools of thoughts which are well documented are the absolute moral and the
relativism ethics. The contrasting view of consequences over the norm decided by social
environment.
This chapter suggests taking a better look at the evolution and development of business
ethics and its related issues.

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Your objectives
In this chapter you will learn about the following:

The evolution and development of business ethics

The importance of business ethics
The approaches to solve business ethics issues
The stakeholder theory of the corporation

1 The Development and Evolution of Business Ethics

One of the earliest examples of utilitarian reasoning is found in Sophocles' Antigone (ca. 440
BCE), in which we find King Creon faced with the tragic task of sacrificing his beloved niece,
Antigone, who has violated the law by performing funeral rites over her brother. Polynices.
Creon judges that it is necessary to sacrifice one person rather than expose his society to
the dangers of rebelliousnessregardless of that person's innocence or social standing:

As a formal ethical theory, the seeds of utilitarianism were sewn by the ancient Greek
philosopher Epicurus (342-270 BCE), who stated that "pleasure is the goal that nature has
ordained for us it is also the standard by which we judge everything good. According to this
view, rightness and wrongness are determined by pleasure or pain that something produces.
Epicurus's theory focused largely on the Individuals personal experience of pleasure and
pain, and to that extent he advocated a version of ethical egoism. Nevertheless, Epicurus
inspired a series of eighteenth-century philosophers who emphasized the notion of general
happiness - that is, the pleasing consequences of actions that impact others and not just the
individual. Francis Hutcheson (1694-1746) stated that "that action is best, which procures
the greatest happiness for the greatest numbers." David Hume (1711-1776) introduced the
term utility to describe the pleasing consequences of actions as they impact people.

1.1 Utilitarianism
The classical expression of utilitarianism, though, appear in the writings of two English
philosophers and social reformers Jeremy Bentham (1748-1832) and John Stuart Mill
(1806-1873). They were the nonreligious ancestors of the twentieth-century secular
humanists, optimistic about human nature and our ability to solve our problems without
recourse to God. Engaged in a struggle for legal as well as moral reform, they were
impatient with the rule-bound character of law mid morality in eighteenth- and
nineteenth-century Great Britain and tried to make the law serve human needs and
interests.
Jeremy Bentham
There are two main features of utilitarianism, both of which Bentham articulated: the
consequentialist principle (or its teleological aspect) and the utility principle (or its
hedonic aspect). The consequentialist principle states that the rightness or wrongness of
all is determined by the goodness or badness of the results that flow from it. It is the end,
not the means that counts; the end justifies the means. The utility, or hedonist, principle
states that the only thing that is good in itself is some specific type of state (for example,
pleasure, happiness, welfare). Hedonistic utilitarianism views pleasure as the sole good
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and pain as the only evil. To quote Bentham, "Nature has placed mankind under the
governance of two sovereign masters, pain and pleasure. It is for them alone to point out
what we ought to do, as well as what we shall do. An act is right if it either brings about
more pleasure than pain or prevents pain, and all
is wrong if it either brings about
more pain than pleasure or prevents pleasure from occurring.
Bentham invented a scheme for measuring pleasure and pain that he called the hedonic
calculus: The quantitative score for any pleasure or pain experience is obtained by
summing the seven aspects of a pleasurable or painful experience: it's intensity,
duration, certainty, nearness, fruitfulness, purity, and extent. Adding up the amounts of
pleasure and pain for each possible act and then comparing the scores would enable us
to decide which act to perform.
There is something appealing about Benthams utilitarianism. It is simple in that there is
only one principle to apply: Maximize pleasure and minimize suffering. It is common
sense and we think that morality really is about reducing suffering and promoting
benevolence. It is scientific: Simply make quantitative measurements and apply the
principle impartially, giving no special treatment to ourselves or to anyone else because
of race, gender, personal relationship, or religion.
However, Benthams philosophy may be too simplistic in one way and too complicated in
another. It may be too simplistic in that there are values other than, and it seems too
complicated in its artificial hedonic calculus. The calculus is encumbered with too many
variables and has problems assigning scores to the variables. For instance, what score
do we give a cool drink on a hot day or a warm shower on a cool day? How do we
compare a 3-year-old's delight over a new toy with a 30-year-old 's delight with a new
lover? Can we take your second car from you and give it to Beggar Bob, who does not
own a car and would enjoy it more than you? And if it is simply the overall benefits of
pleasure that we are measuring, then if Jack or Jill would be "happier' in the Pleasure
Machine or the Happiness Machine or on drugs than in the real world, would we not
have an obligation to ensure that these conditions obtain?

The Strengths of Utilitarianism

Utilitarianism has three very positive features. The first attraction or strength is that it is a
single principle, an absolute system with a potential answer for every situation: Do what
will promote the most utility! Its good to have a simple, action-guiding principle that is
applicable to every occasion even if it may be difficult to apply (life's not simple).
Its second strength is that utilitarianism seems to get to the substance of morality. It is
not merely a formal system that simply sets forth broad guidelines for choosing principles
but often 110 principles - such as the guideline: "Do whatever you call Rather it has a
material core: We should promote human (and possibly animal) flourishing mid reduce
suffering. The first virtue gives us a clear decision procedure in arriving at our answer
about what to do. The second virtue appeals to our sense that morality is made for
people and that morality is not so much about rules as about helping people and
alleviating the suffering in the world.
A third strength of utilitarianism is that it is particularly well suited to address the problem
of posterity - namely, why we should preserve scarce natural resources for the
betterment of future generations of humans that do not yet exist. Expressed rhetorically,
the question is "Why should I care about posterity; what has posterity ever done for me.
As long as the quality of life of future people promises to be positive, we have all to
continue human existence, to produce human beings, and to take whatever actions are
necessary to ensure that their quality of life is not only positive but high.
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The Criticism of Utilitarianism

The first set of problems occurs in the very formulation of utilitarianism: "The greatest
happiness for the greater number." Notice that we have two "greatest" things in this
formula: "happiness ' and "number." Whenever we have two variables, we invite
problems of determining which of the variables to rank first when they seem to conflict.
To see this point, consider the following example: 1 am offering a $1,000 prize to the
person who runs the longest distance in the shortest amount of time. Three people
participate: Joe runs 3 miles in 31 minutes, John runs 7 miles in 30 minutes, and Jack
runs 1 mile in 6 minutes. Who should get the prize? John has fulfilled one part of the
requirement (run the longest distance), but Jack has fulfilled the other requirement (run
the shortest amount of time).
This is precisely the problem with utilitarianism. On the one hand, we might concern
ourselves with spreading happiness around so that the greatest number obtain it (in
which case, we should get busy and procreate a larger population). On the other hand,
we might be concerned that the greatest possible amount of happiness obtains in society
(in which case, we might be tempted to allow some people to become far happier than
others, as long as their increase offsets the losers' diminished happiness). So should we
worry more about total happiness or about highest average?
Utilitarian also need to be clear about specifically whose happiness we are talking about:
all beings that experience pleasure and pain, or all human beings, or all rational beings.
One criterion might exclude mentally deficient human beings, and another might include
animals. Finally, utilitarian need to indicate how we measure happiness and make
interpersonal comparisons between the happiness of different people.

1.2 Kant and Deontological Theories

To understand Kant's moral philosophy, it is helpful to know a little about his life. He was
born in Konigsberg, Germany, in 1724, and died there eighty years later, never having
left the surroundings of the city. He was short, quiet man and so methodical that, as
tradition has it, the citizens of Konigsberg set their watches by his daily 3:00 p.m. walks.
He never married. He devoted his life to the study and teaching of philosophy at the
University of Konigsberg. His greatest publication. The Critique of Pure Reason (1781),
was heralded in his own day as a monumental work, and his Foundations of the
Metaphysics of Moral(1785) is generally regarded as one of the two or three most
important books in the history of ethics.
There were several strong influences on Kant's ethical thinking. The first was Pietism, a
sect within the Lutheran Church, which Kant's parents adhered to and which set a tone
of deep sincerity co his views. Pietists emphasized honest, deep feeling, and the moral
life rather than theological doctrine or orthodox belief. It's a religion of the heart, not the
head, of the spirit rather than of ritual. However, as an intellectual, Kant emphasized the
head as much as the heart, but it was a head concerned about the moral life, especially
good will. It is not correct beliefs or results that really matter but inner goodness. The
idea is that, if we live within our lights, we will be given more light and that God judges us
not on how lucky or successful we are in accomplishing our tasks but on how earnestly
we have lived according to our principles. This impacted Kant's notion of the good sill as
the sole intrinsic good in life.
The second influence was the work of Jean-Jacques Rousseau (1712-1778) on human
freedom, especially his Social Contract, and it was said that the only time Kant ever
missed his afternoon walk was the day when he read that book. Rousseau taught him
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the meaning and importance of human dignity, the primacy of freedom and autonomy,
and the intrinsic worth of human beings apart from any functions they might perform.
The third influence was the philosophical debate of his time between rationalism and
empiricism. The fourth influence was natural law intuitionist theories that dominated
moral philosophy at that time. Let's look at these little two influences in more detail.

Rationalism and Empiricism

The philosophical debate between rationalism and empiricism took place in the
seventeenth and eighteenth centuries. Rationalists, such as Ren Descartes, Baruch
Spinoza, Gottfried Leibniz, and Christian Wolff, claimed that pure reason could tell us
how the world is, independent of experience. We can know metaphysical truth such as
the existence of God, the immortality of the soul, freedom of the will, and the universality
of causal relations apart from experience. Experience may be necessary to open our
minds to these ideas, but essentially they are innate ideas that God implants in us from
birth. Empiricist, led by John Locke and David Hume, on the other hand, denied chat we
have any innate ideas and argued that all knowledge comes from experience. Our minds
are a tabula rasa, an empty slate, upon which experience writes her lessons.
The rationalists and empiricists carried their debate into the area of moral knowledge.
The rationalists claimed that our knowledge of moral principles is a type of metaphysical
knowledge, implanted in us by God, and discoverable by reason as it deduces general
principles about human nature. On the other hand, empiricists, especially Francis
Hutcheson, David flume, and Adam Smith, argued that morality is founded entirely on the
contingencies of human nature and based on desire. Morality concerns making people
happy, fulfilling their reflected desires, and reason is just a practical means of helping
them fulfil their desires. There is nothing of special importance in reason in its own right.
It is mainly a rationalizer and servant of the passions. As Hume said, "Reason is and
ought only to be a slave of the passions and can never pretend to any other office than
to serve and obey them." Morality is founded on our feeling of sympathy with other
people's sufferings, on fellow feeling. For such empiricists then, morality is contingent
upon human nature:
Human nature - Feelings and Desires - Moral principles

If we had a different nature, then we would have different feelings and desires, and
hence we would have different moral principles.
Kant rejected the ideas of Hutcheson, Hume, and Smith. He was outraged by the
thought that morality should depend on human nature and be subject to the fortunes of
change and the luck of empirical discovery. Morality is not contingent but necessary. It
would be no less binding on us if our feelings were different from what they are. Kant
writes,
Every empirical element is not only quite incapable of being an aid to the principle of morality, but
is even highly prejudicial to the purity of morals; for the proper and inestimable worth of an
absolutely good will consists just in this, that the principle of action is free from all influence of
contingent grounds, which alone experience can furnish. We cannot too much or too often repeat
our warning against this lax and even mean habit of thought which seeks for its principle amongst
empirical motives and laws; for human reason in its weariness is glad to rest on this pillow, and in
a dream of sweet illusions it substitutes for morality a bastard patched up from limbs of various
derivation, which looks like anything one chooses to see in it; only not like virtue to one who has
once beheld her in her true form.

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No, said Kant, it is not our desires that ground morality but our rational will. Reason is
sufficient for establishing the moral law as something transcendent and universally
binding on all rational creatures.
1.3 Evolution of Business Ethics over the years
1974: The first conference held at the University of Kansas.
1975: Business ethics became institutionalized at many levels through writings
and conferences.
1979: Three anthologies on business ethics appeared:
Ethical Theory and Business by Tom Beauchamp and Norman Bowie;
Ethical Issues in Business: A Philosophical Approach by Thomas Donaldson
and Patricia Werhane; and
Moral Issues in Business by Vincent Berry.
1980s:The subject was taught in several universities in the US and Europe.
There were also, by this time, many journals of business ethics,
apart from centres and societies established to promote ethical practices.
1982: Richard De George brought out Business Ethics, and
Manuel G. Velasquez published his Business Ethics: Concepts and Cases.
1990: Business ethics as a management discipline was well-established.
Parallel to these academic pursuits, the late 1980s and early 1990s
saw increased concern for consumer rights, quality, safety, price,
customer service and environment in Britain.
Simultaneously, with these developments, religion also lent its powerful voice.

2 The Growing Importance of Ethics in Management

The global economy is becoming far more complex and far more competitive. New
technologies are being developed. New products and processes based upon those
technologies are being designed. New markets are being opened, new sources goods and
services are being sought, and new types of investment are being used. The result is that
employees at all levels within a business firm, not just those in the upper echelons and
corner offices, are now being pressured to increase sales, reduce costs, and speed
operations. Those pressures come in the form of performance rankings, monetary
incentives, and employment threats. The problem is that the decisions and actions that are
taken in reaction to those pressures may benefit the financial performance of the firm
(measured by revenues, costs, and profits) but harm the social performance (difficult to
measure, but represented by the overall well-being and satisfaction level of those associated
with the firm as employees, customers, suppliers, distributors, creditors, stockholders, local
residents, national citizens, and global inhabitants). These conflicts between the financial
performance and the social performance of business firms are what this text terms the moral
problems of management.

2. 1 Importance and Need for Business Ethics

Ethics concern an individuals moral judgements about right and wrong. Decisions taken
within an organisation may be made by individuals or groups, but whoever makes them
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will be influenced by the culture of the company. The decision to behave ethically is a
moral one; employees must decide what they think is the right course of action. This may
involve rejecting the route that would lead to the biggest short-term profit.
Ethical behaviour and corporate social responsibility can bring significant benefits to a
business. For example, they may:

Attract customers to the firms products, which means boosting sales and profits
Make employees want to stay with the business, reduce labour turnover and
therefore increase productivity
Attract more employees wanting to work for the business, reduce recruitment costs
and enable the company to get the most talented employees
Attract investors and keep the companys share price high, thereby protecting the
business from takeover.
Knowing that the company they deal with has stated their morals and made a
promise to work in an ethical and responsible manner allows investors peace of
mind that their money is being used in a way that arranges with their own moral
standing. When working for a company with strong business ethics, employees are
comfortable in the knowledge that they are not by their own action allowing unethical
practices to continue. Customers are at ease buying products or services from a
company they know to source their materials and labour in an ethical and
responsible way. For example, a coffee company which states all their raw beans
are picked from sustainable plants where no deforestation has occurred, by people
paid a good living wage, in an area where investments have been made to ensure
that producing the coffee for a foreign market has not damaged the local way of life,
will find that all these elements of their buying strategy becomes a selling point for
their final product.
A company which sets out to work within its own ethical guidelines is also less at
risk of being fined for poor behaviour, and less likely to find themselves in breach of
one of a large number of laws concerning required behaviour.
Reputation is one of a companys most important assets, and one of the most
difficult to rebuild should it be lost. Maintaining the promises it has made is crucial
to maintaining that reputation.
Businesses not following any kind of ethical code or carrying out their social
responsibility leads to wider consequences. Unethical behaviour may damage a
firms reputation and make it less appealing to stakeholders. This means that profits
could fall as a result.
The natural world can be affected by a lack of business ethics. For example, a
business which does not show care for where it disposes its waste products, or fails
to take a long-term view when buying up land for development, is damaging the
world in which every human being lives, and damaging the future prospects of all
companies.
Ethics is important to businesses for many reasons. Businesses can increase sales
or increase their reputation.

3 The approaches to solve business ethics issues

3.1 Egoism Approach
Egoism can take several forms, but we will consider only a universalistic approach,
which argues that each and every person should be selfish. From this perspective, the
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moral obligation of each individual is to perform only those acts that are advantageous to
himself or herself. The primary advocate of this position is Ayn Rand, who at age twentyone left communist Russia in the 1920s for the United States. In her career as a novelist,
philosopher and social commentator, she advocated egoism as the virtue that made
America great and railed against altruism, which she saw as the downfall of her native
Russia.
In order to understand how selfishness is redeemed as a virtue in egoism, we need to
define it correctly.' According to Rand, we should adopt the simple dictionary definition:
"concern with one's own interests." This distinguishes ethical egoism's concept of
selfishness from two alternative meanings. First, this is not psychological egoism. The
psychological egoist says that we cannot help but act from selfish motives. Nothing we
do has altruistic motives. Even if I sell my home to help victims of a natural disaster, the
psychological egoist says that supposedly the reason I give the money away is that it
makes me feel good or helps me avoid unpleasant feelings of guilt. This is a sign that I
consider my psychological well-being more important than financial security. In other
words, psychological egoism says it is impossible not to be selfish. Ethical egoism, on
the contrary, says that it is possible to act altruistically. We can be unselfish, but we
should not be.
Second, ethical egoism is different from what we might call egotism. Egotism says that
we should do what is in our interest now. It is the pursuit of immediate desires and
impulses. In contrast, Rand argues that satisfaction of personal goals is to be pursued
rationally. We should take the long-term view and ask what is in our interest over a
lifetime. Ethical egoism maintains that it will work this way across the board. If we allow
individuals to do that which will get them to their goals, whether these goals are political,
social or economic, society benefits from the resulting innovation and improvement.
Thus, for Rand, the virtue in selfishness is that it respects individuals and their choices. It
allows them to define their interests and pursue them or, if they wish, to evade them. But
no one forces the choice on them. No one makes you go into the mousetrap business,
forces employees to work for you or compels consumers to buy. These are decisions
based on self-interest. The metaphor Rand prefers is that of the "trader." "A trader is a
man who earns what he gets and does not give or take the undeserved. He does not
treat men as masters or slaves, but as independent equals. He deals with men by means
of a free, voluntary, unforced, uncoerced exchange-an exchange which benefits both
parties by their own independent judgment."
Rand argues that the model of the trader has social benefits. First, it establishes justice
as a principle. People's rights are respected and protected. These rights are not imposed
from the outside but grow out of individual self-interest. If you do not want to trade, you
do not have to. Whether we are talking about our money, affections, time or vote, rational
people trade only when they determine that the transaction will advance their personal
interests. Therefore, freedom is enhanced. No one is forced to barter.
Second, egoism promotes self-esteem. What we get, we deserve. Our achievements are
not the result of charity but of our efforts. Thus, we have pride in our accomplishments.
This, in turn, allows us to honestly esteem others. It is one's view of oneself that
determines one's view of human nature and one's way of relating to other human beings.
The respect and goodwill that persons of high self-esteem tend to feel toward other
persons is profoundly egoistic; they feel, in effect: "Other people are of value because
they are of the same species as myself." This is the psychological base of any emotion
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of sympathy and any feeling of species solidarity. But this causal relation cannot be
reversed. A person must first value him- or herself-and only then can a person value
others."

3.2 Behaviourism Approach

B. F. Skinner, a psychologist who taught at Harvard, understands human actions
differently from what has been outlined above. He argues that the belief that human acts
are free is mistaken. What we do is not the result of decisions we make. Instead, it is
determined. Determinism is the belief that nothing happens either randomly or by choice.
What we call choices are actually the result of some previous event: a cause. Actions
that we think are the result of freely made decisions are only the effect of an
unrecognized cause. In Skinner's view, we do not have thought processes in which we
choose a course of action. "Acting" presupposes that we make decisions. Instead, our
"actions" are really just predispositions to behave in certain ways as the result of physical
causes. For this reason, Skinner's approach is given the name
If Skinner's behaviourism is correct, the freedom we feel is an illusion. We have no more
freedom than trees, fenders or volcanos. Therefore when someone says, "I couldn't help
myself," he is more correct than he may want to be. Generally our "I can't help myself'
statements are a way of talking about something that exerts strong influence on us. We
don't mean to say that no other response was possible in the situation. However, Skinner
says that this is precisely the case. Behaviour is controlled by cause and effect, what
behaviourists call stimulus and response. When a particular cause or set of causes
(stimuli) are in place, a specific effect (response) must follow. Since his assumptions
about what is real lead to the conclusion that human beings are not free, Skinner
promotes a radically different interpretation of ethics. Without freedom, moral statements
have no ethical meaning. Ethics is reduced to a behavioural strategy in which people are
trained to behave in certain ways. We lose much more than just ethics, however.
Behaviourism's understanding of "I can't help myself' applies to all aspects of human life.
Thought, belief, love, responsibility, sin and reward all cease to exist in any traditional
sense.

3.3 Utilitarianism
Although Aristotle cannot be classified as a utilitarian, the argument for happiness as the
guide to determining the good goes back to him. His ethics begins with a simple
question: What do our actions tell us about what we want? When we go on vacation,
advance our education or invest in the stock market, what are we really after? You may
believe these questions have three different answers, but Aristotle says that ultimately
the answer to all these questions is the same. We do want to relax, learn more and make
money, but these are not ends in themselves. We can still ask why we pursue relaxation,
education and money. Aristotle's answer is that we believe (though not always correctly)
that such things are means to happiness.
If we try to push this further and ask people why they want to be happy, we get puzzled
looks. The answer generally sounds something like "I want to be happy because it
makes me happy." We end up with circular explanations because it is difficult to get
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behind happiness to a more ultimate goal. That is because, says Aristotle, "everything
that we choose we choose for the sake of something else-except happiness, which is an
end."' Or, to use different terminology, happiness is the only thing that has intrinsic value.
It is good in itself, not just a way to get to something else. If pleasure is the only thing
that is intrinsically good, then pain (including physical, intellectual, spiritual or social
pain), its opposite, is the only thing that is intrinsically bad.
The name utilitarianism comes from the idea of utility, or usefulness. Utilitarianism says
that acts are morally right when they succeed in (or are useful for) bringing about a
desired result. The result that should be desired is happiness, because it alone is
intrinsically good. This is incorporated into the basic statement of utilitarian ethics, the
"Principle of Utility." As Jeremy Bentham defines it, `By the Principle of Utility is meant
that principle which approves or disapproves of every action whatsoever, according to
the tendency which it appears to have to augment or diminish the happiness of the party
whose interest is in question."' Acts are good when the result is happiness, evil when the
result is unhappiness. We can seek after other virtues, such as kindness, justice or
fairness. But these are good only when they lead to happiness. They are a means to an
end. Only happiness is an end in itself, therefore, it is the only true standard of
goodness.
"For the Greatest Number"

While the "greatest happiness" principle is central to utilitarianism, the other part of the
equation, "for the greatest number," is also significant. In his definition of the principle of
utility, Bentham speaks of "the party whose interest is in question." This "party" refers not
only to oneself but also to everyone affected by a decision. Our decisions involve other
people, so asking only about the good that will result for us is inadequate. We are
obliged to consider the well-being of all who are touched by our decisions.
Two things are involved in requiring happiness "for the greatest number." First, this
principle includes what egoism leaves out. Each person is valuable, therefore one
person's happiness is as important as another's. Equal regard for the interests of all is
the basis of democracy. Thus utilitarianism is an altruistic approach to the extent that
whenever the majority will receive greater happiness, you have an obligation to honor its
decisions even if it is not to your advantage.
This leads to the second observation. Utilitarianism acknowledges that happiness "for
all" cannot be achieved in every situation. People's interests conflict, and some people
will have to concede their interests for the sake of "the greatest number." If a vote does
not go your way, the will of the majority should be accepted. This requires a bit of
sacrifice from everyone. However, the sacrifice is not good in itself. As John Stuart Mill
puts it, "The only self-renunciation which [utilitarianism] applauds is devotion to
happiness, or to some of the means of happiness, of others."3 Therefore, sacrificing our
desires to the will of the majority is good because respecting its opinion will result in the
greatest happiness for the most people. Everyone wins in the long run.

3.4 Kantian Ethics

Duty is the centrepiece of Immanuel Kant's moral philosophy. Being good is a matter of
reverence for duty. Kant's emphasis on obligation is very different from utilitarianism's
emphasis on happiness. People who follow Kant care about rules and motives, while

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utilitarians want to know about results. At the root of the disagreement between the two
systems is the question of authority. What determines what is right and what is wrong?
Unlike the scenarios above, Kant's concept of ethical obligation is not founded on
criminal or military law. These systems of law do not apply to everyone in every
circumstance, but Kant argues that ethical duties are the same for all. He also asserts
that ethical duty should not be based on the opinions of any individual, group, tradition,
faith, cultural norm or even God's will. These all require that we first believe some
nonethical truth in order to believe the ethical system built on it. For example, if
Confucianism is not true, we have no reason to believe that Confucian ethics are true.
Kant argues that moral truth stands by itself; it is autonomous and self-contained. We do
not go outside the realm of ethics to find a justification for ethics.
This also tells us why Kant would reject utilitarianism (as well as all other forms of
consequentialism). Consequences only tell us what is. The way to test the truthfulness of
a claim about physical objects includes many things which have nothing to do with right
and wrong. The weight, sound, smell or colour of an object is ethically irrelevant. Ethics,
on the other hand, is about what should be. Since consequentialism relies on results (is),
it can never get us to ethics (ought). Thus Kant argues that we need to begin from some
foundation other than consequences.
The paragraphs above eliminate the foundation for just about every ethical system
available, whether it is self-interest, culture, collective decision, God or results. So what
is our authority for ethics? For Kant, reason alone is the foundation. The only ethical
rules that should be adopted are those which show themselves to be logically consistent
and which do not result in self-contradiction. Kant says moral principles that meet the
demands of reason are always valid for everyone. He even goes so far as to state that
each individual, acting rationally, creates universal moral truth. Reason is not just the
judge, but also the source of right and wrong.
Kant grants reason such a high status because rationality is what allows humans to be
moral beings. Our actions are not the result of instincts embedded in our genetic
structure or reactions to the world around us. Instead, reason gives us freedom to
deliberate between options and make a decision. And freedom gives us something that
animals do not have: moral responsibility to duty. Since we choose what we do, unlike
animals, we must answer for our choices. While we do not speak of penguins or whales
as morally good or evil, reason requires that we hold people responsible for freely made
decisions. Thus rationality is the source of human freedom, value and duty. The positive
side of our heightened responsibility is the elevation of human worth. It is reason that
gives humanity value.
The role of reason is to direct the will, the instrument of freedom. Will in itself is neither
good or evil. The real issue is what we do with it. When properly used (rationally guided),
will is good. In fact, Kant begins the first chapter of his Groundwork of the Metaphysics of
Morals by stating, "It is impossible to conceive anything at all in the world, or even out of
it, which can be taken as good without qualification, except a good will."'
This brings us to the role of motive. Kant moves ethical evaluation to the beginning of the
process instead of putting it at end, as utilitarianism does. Rather than relying on results
to tell us whether we have done the right thing, we look at the motive. Even if we do not
reach our goals because of unforeseen twists in events, if we act out of an intention to
fulfil our duties (or good will), we have met our ethical obligation. Thus if the soldier
breaking his leg, and he has still done what is morally required, he is fulfilling his duty. It
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is not success that counts; it is his motivation to do his duty. Nothing is good except
reverence for duty. It is duty for duty's sake.

3.5 Virtue Ethics Approach

What Is Virtue?
Before we get too far, we need some definition of what virtue is. First, while "character" is
often taken today to mean one's personality type, the classical meaning refers to an
internal predisposition to act in certain ways in certain situations. Although personality
type is prima ily a matter of genetics, virtue is learned. Moreover, while personality types
vary from person to person, the virtues can be the same for all. For instance, one person
may have an intense personality and another may be easy going. However, virtue ethics
says that both can and should have character qualities such as courage, self-discipline
and benevolence. How we manifest these attributes will differ according to our
circumstances, but a newspaper editor, a student, a full-time parent or a police officer all
need them.
Second, virtues are not just any internal dispositions that lead to action. They are good
character traits that result in good acts. Thus, virtue ethics involves a belief in ethical
truth. It sees a real difference between good and evil, and between good people and evil
people. These terms do not simply refer to our preferences or tastes; they point to some
kind of objective truth about the way we ought to be.
Third, character ethicists are more concerned with virtue than with virtues. While we may
be able to isolate particular virtues in a person, the ideal is that they reside in individuals
as a package. It is not enough that an individual be only courageous, fair or selfdisciplined. Virtue is not a multiple-choice affair in which people pick and choose the
virtues they like. The goal is to be a good person. This involves possession of all the
traits above and others as well.
For example, if the story of the good Samaritan ended after he had stopped to bandage
the wounds of the man waylaid by bandits, the narrative perhaps would be known as
"The Pretty Good Samaritan." This Samaritan did indeed meet the minimal expectations
of moral responsibility. However, he went beyond "pretty good" when he loaded the
injured man on his donkey, took him to the inn and paid his room and board there. This is
more than simply following a rule or fulfilling a duty; it is moral excellence. Virtue ethics,
with its focus on ideals, helps us express what we already recognize: that there is more
to ethics than a bare good or bad. While rule-based ethics reduces our evaluations to
right and wrong, character ethics can speak easily of acts as good or better (or bad and
worse) insofar as they exemplify an ideal to a greater or lesser degree.
Why Be Virtuous?
We are frequently encouraged to be good, but why being good is important is seldom
explained. However, every ethical system must ultimately address the question, Why be
good? For virtue ethics, the answer is that goodness is necessary for a good life. The
good life is not one of fame or wealth but one lived in accordance with reason: a
balanced life. Virtue means that everything is functioning as it should. Thus, Plato and
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Aristotle both reject the belief that we can separate ethics from the other things we do.
Anything worth having is connected with character: Ethics is an integral part of a
worthwhile life. And, as we have seen, character should be guided by reason

Christianity and Virtue

It should not be surprising that a number of Christian ethicists have adopted virtue
theory, and it does not take much ingenuity to see how this approach can be
"christianized." Instead of viewing Plato's moral forms and Aristotle's golden mean as
impersonal ideals, they can be understood as God's moral attributes. Courage, justice,
love, patience and the other ethical ideals do not have their own individual existence as
individual and abstract entities but come together in God's being.
This provides a mandate for seeking certain virtues. If God is caring and we are to be
like God, we should become caring. And Jesus is viewed as the hero of virtue who
models what his followers should strive to become. To Plato's list of the cardinal virtues
of temperance, courage, wisdom and justice we might add theological virtues like faith,
hope and love, as Augustine did. For many, this gives depth to Christian ethics. God is
more than a being who does good; he is good. Similarly, the goal for the Christian is not
just a balance sheet that shows more good deeds than evil. We are to become virtuous
people who reflect the nature of God.
Even though both Plato and Aristotle died more than two thousand years ago, many
contemporary proponents of character education have adopted their core concepts.
They view contemporary social ills as the result of value systems in which all ideas are
seen as equally valid. To correct these problems, advocates of character education call
for a return to virtues such as those found in the classical writers. They agree with Plato
and Aristotle that these moral qualities will not become part of a person's life by default.
Simply discussing alternative viewpoints does not yield better people. Instead, certain
character traits are superior and should be taught, both verbally and by example.
Moreover, they argue that the rightness of these virtues will be evident to any rational
person. For these modem virtue theorists, as for Plato and Aristotle, ethics is not simply
a separate compartment among others in a human life. Everything comes down to the
quality of one's character.

3.6 Situation Ethics Approach

Situation ethics is often seen as the direct opposite of Christian ethics. It is not
uncommon to hear some Christians, when confronted by a decision with which they
disapprove, say, "That's just situation ethics." Is this evaluation correct? Is situationism
the antithesis of a Christian approach? Joseph Fletcher, the most visible advocate of
situation ethics, does not see it that way. He says his intent is not to offer an alternative
to Christian ethics but to set out a model of Christian ethics. And he views situationism
as the best means of doing this. In fact, he goes so far as to state that "Christian ethics is
a situation ethic."
The fundamentals of situation ethics are summarized by Fletcher in a series of six
propositions:

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Only one thing is intrinsically good, namely, love: nothing else.

The ultimate norm of Christian decisions is love: nothing else.
Love and justice are the same, for justice is love distributed.
Love wills the neighbour's good whether we like him or not.
Only the end justifies the means: nothing else.
Decisions ought to be made situationally, not prescriptively.

In his final proposition-"Decisions ought to be made situationally, not prescriptively'!-Fletcher argues that abstract ethical questions are unanswerable. It makes no sense to
ask if abortion is permissible. It may or may not be. Everything depends on the situation.
We do not have a real question without a concrete situation. Each case is different, and
we cannot properly pronounce a verdict until we know all the variables. Ethics can be
done only on a casuistic (case study) basis. Rules are not enough. We need to know the
facts of the case- the who, what, when, where and why factors-to know what a loving
solution is.
This indicates that, to some extent, love is not enough by itself. Even when we know that
we ought to love in all situations, we still need to know the details of the situation before
we give an ethical answer. This is because, Fletcher argues, love is not a substantive; it
does not have predefined factual content. It is not a property or characteristic. Love is,
instead, what Fletcher calls a "formal" principle. It refers to the motive by which we act
("act in a loving way") without prescribing beforehand what act is loving. Love tells us
how we ought to go about doing something without telling us what to do. The content of
love-the "what"-arises only as we come to understand the concrete demands of the
situation. The principle of love is absolute, but the application of the principle is relative to
the situation. As Fletcher puts it, the answer is found in "love plus the situation."
Some people are able to stay beyond the reach of some of the big questions of the daydivorce, abortion, homosexuality, euthanasia and others-but as time goes on fewer of us
can escape dealing with these issues in our own lives or the lives of those we care
about. And when these issues finally hit home, an interesting phenomenon sometimes
happens. We find that answers we once held with confidence no longer seem adequate
now that we know people who face tough decisions. No longer can we depersonalize the
problem and handle it as a mental puzzle. Now we see human faces embroiled in
struggle, and those faces belong to people we love.
Situation ethics wants that sense of attachment in moral decision making. It does not ask
us to adopt a wishy-washy version of love that excuses anything someone may want to
do, but situationism does remind us that people, not rules, are what make ethics so
important. Legalism demands that we stand back from the situation, but when we love
the people who wrestle with complex issues, it seems more appropriate to stand close.
In such times, Fletcher argues that only love counts. And he notches up the responsibility
level for Christians by reminding us that love is the proper response, not only for those
with whom we have a special relationship but for all people.

3.7 Natural Law Approach

What's "Natural" About Natural Law?
What I have described above is often labelled "natural theology." This is the idea that
nature, both physical and human, leads us to correct ideas about God. If we correctly
read the "fingerprints" to learn how nature works, in Aquinas's view, the answer to why
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things are as they are will be God. Thus the "natural" in "natural law" should not be
understood as if the laws embedded in nature come from nature itself. Instead these
laws originate from God. They are God's laws for nature. Natural theology is built on
what is called "general revelation." General revelation is the doctrine that God reveals
certain things about himself to all people. Those who do their detective work properly can
work back through the chain of cause and effect to arrive at truths about God.
Natural law ethics is the part of natural theology that tells us how God wants us to live
here and now. Aquinas says nature reveals two ethically important truths about God.
First, the logic of the world tells us that God is rational. The rationality of God is reflected
in the consistency and structure of nature. Our own rationality also points to God's
rationality. After all, humankind's capacity for reasoning did not just happen. It is an effect
that must be explained by a cause. Second, the world is full of just the things humans
need. Physical things like food, water and oxygen have a use or purpose, even though
these objects are not aware of their purpose. Their presence is not just a lucky fluke. To
Aquinas, it demonstrates that God has intentions for his creation.
"Doing what comes naturally" sounds dangerous because in modem parlance it usually
means that we can follow our impulses, whatever they may be. However, Aquinas is not
saying, for example, that merely because humanity naturally seeks to survive that we
therefore can kill any being that threatens us. Or that because human beings naturally
seek to propagate the species that we therefore can attempt to procreate whenever the
urge strikes. First, we are to follow our natural desires rationally. Reason puts limits on
procreation because we acknowledge social, moral and spiritual obligations to our
offspring, and these obligations cannot be fulfilled unless the boundaries are recognized
and followed.
Aquinas's natural law approach helps us makes sense of a question that often puzzles
Christians. If right and wrong come from God, why do many non-Christians have moral
principles similar to those in Christianity? Aquinas says similarities are to be expected. All
inhabit the same world and process information from it through the same rational
faculties. Therefore, Christians and non-Christians alike should reach the same
conclusions about morality, even if non-Christians do not recognize the source (although
Aquinas argues that correct use of reason would reveal this as well).
At the same time, Aquinas does not make moral goodness the equivalent of salvation.
While God is present in such a way that we can see him partially in nature, ultimate
salvation involves a destination beyond and above nature. This requires Christ (not just
creation), faith (not just reason) and Scripture (not just general revelation).

ACTIVITY 1
(50 MINS)
Your task is to study the case below and answer the question:- Do you go to the FBI?

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Case : Alpha-Male Sport Shoes

You are a midlevel accountant at Alpha-Male Sport Shoes. Your company competes with the
big brands like Nike and Adidas but you offer cheaper prices and more garish fashionable
colours. The brand has been doing reasonably well. Your factories are in Vietnam. Your
sales are in the USA. The company also has a venture capital arm that seeks to find new
avenues to diversify the company in new global markets.
Your boss, Cora, calls in sick and asks you to handle any emergencies. She gives you her
computer access code. After you finish your work for the day, you make one last check on
Coras account and in the process of following up upon a routine inquiry you discover that
one of the venture capital accounts, Elysium Fields, is a totally bogus operation. This bothers
you. You decide to stay late at work and subsequently discover that it is some sort of phony
operation. Lots of company monies go into the venture capital arm and especially into
Elysium Fields through various foreign bank accounts that offer secrecy and do not report to
the Internal Revenue Service (IRS). You are convinced that something terribly wrong is
happening. Your company is breaking the law. Just before you leave for the day you discover
a suspicious e-mail that ties Elysium Fields into the illegal drug trade from Vietnam. You print
out the suspicious files and accounts transactions. Then you go home with the copies. You
are a Vietnamese citizen of the USA, Thuy Nguyen. You are a single mother with a sevenyear-old daughter. You have heard over and over again about the pain that illegal drug traffic
has caused in the USA. Your own brother died of a drug overdose. You feel that Alpha-Male
Sport Shoes is a front company for illegal drug traffic. You have enough evidence in your
briefcase to go to the Federal Bureau of Investigation (FBI) and open an investigation that
will probably lead to a conviction. However, this will disrupt your life. You will be put into the
witness protection program, which will greatly disrupt your and your daughters lives. If you
do nothing, more people will die via this particular drug outlet. If you shut them down, then
your own family life is permanently disrupted. What should you do?
Do you go to the FBI?
4 The stakeholder theory of the corporation
The distinction between a stakeholder conception of the corporation and a conventional
input-output perspective is highlighted by the contrasting models displayed in Figures 4.1
and Figure 4.2.

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In Figure 1.1 investors, employees, and suppliers are depicted as contributing inputs, which
the "black box" of the firm transforms into outputs for the benefit of customers. To be sure,
each contributor of inputs expects to receive appropriate compensation, but the liberal
economics, or "Adam Smith" interpretation, of this model in long-run equilibrium is that input
contributors, at the margin, receive only "normal" or "market competitive" benefits (i.e., the
benefits that they would obtain from some alternative use of their resources and time).
Individual contributors who are particularly advantaged, such as possessors of scarce
locations or skills, will, of course, receive "rents," but the rewards of the marginal contributors
will only be "normal." As a result of competition throughout the system, the bulk of the
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benefits will go to the customers. {There is, of course, a Marxist-capitalist version of this
model in which both the customer and the investor arrows are reversed, and the object of
the game is merely to produce benefits for the investors. This interpretation now seems to be
confined almost exclusively to the field of finance.) The stakeholder model (Figure 1. 2)
contrasts explicitly with the input output model in all its variations. Stakeholder analysts
argue that all persons or groups with legitimate interests participating in an enterprise so to
obtain benefits and that there is no prima facie priority of one set interests and benefits over
another. Hence, the arrows between the firm its stakeholder constituents run in both
directions. All stakeholder relationships are depicted in the same size and shape and are
equidistant from the "black box" of the firm in the centre.
The distinctive features of conception, as contrasted with conventional input-output
conceptions, will become apparent as our analysis proceeds. Although stakeholder concepts
have been applied in other settings (e.g., government agencies and social programs), these
situations are fundamentally different, and simultaneous discussion of a variety of possible
stakeholder relationships leads, in our view, to confusion rather than clarification. The critical
corporate stakeholder issues, both in theory and in practice, involve evidentiary
considerations and conceptual issues (e.g., the meaning of property rights) unique to the
corporate setting.
It is also worth noting at the outset that the extent to which the stakeholder theory is
understood to represent a controversial or challenging approach to conventional views
varies greatly among market capitalist economies. These differences are highlighted in a
recent issue of The Economist (ISB3: 52):
In America, for instance, shareholders have a comparatively big say in the running of the enterprises
they own; workers . . . have much less influence. In many European countries shareholders have less
say and workers more . . . ln Japan . . . managers have been left alone to run their companies as they
see fitnamely for the benefit of employees and of allied companies, as much as for shareholders.

4.1 Characteristics and forms of stakeholding

Potential corporate stakeholders vary considerably in their nature and characteristics.
The range of possible stakeholders is shown in Figure 4.2. The traditional investor
shareholder interest is already well accommodated within rm decision making. A further
traditional concern is with employees, although how to accommodate this interest is itself
fraught with tensions and conicts. These two are the main internal stakeholders. Then
there is a range of external ones. Some of these are well constituted into a denable
interest; others are not.
Some have a contractual relationship with the company; others do not. There is a body
of opinion that suggests only those with a contractual relationship with the company
should legitimately be considered as stakeholders. Thus along with shareholder investors and
workers (including managers) would be included suppliers, debt-holders and probably
customers.
This leaves out of account, however, others who might be considered stakeholders from
a broader perspective if these organizations were to accept their social responsibilities.
The unemployed could be considered as stakeholders, where companies are large
enough to affect the macro economy or the regional economy; indeed, some rms do
engage in co-operation with public agencies to provide advice and training to the
unemployed, although much of this is now contractual. Similarly, some rms address

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environmental concerns, beyond their legal obligations, and report on these in their
annual reports.
However, as Corry (1997) argues, it may be wrong to extend the stakeholder framework
to parties outside the corporation as it is the government that has the prime responsibility
for overseeing the balance of interest between groups in the wider society. In the national
context, this seems entirely sensible given the need for informed political choice to
resolve competing claims where spill overs are present. In an international context it is
less clear what role governments can play in respect of these issues.

QUICK QUIZ
1.
2.

In some situations a company action can be legal, yet still unethical. True or False
According to the utilitarian view of ethics, what really counts is the net
balance of good consequences over bad. True or False
Oscar, the meat department manager at a supermarket, follows a deontological
view of ethics. He therefore sees no ethical problem in selling rabbit meat
and labelling it as chicken, so long as no customer gets sick. True or False
Business ethics deals primarily with
A. social responsibility.
B. the pricing of products and services.
C. moral obligation.
D. being unfair to the competition.
Small-business owner Jason is thinking about giving a potential customer an
expense paid vacation to Las Vegas for her and her husband. When asked if
he is being ethical, Jason replies, Look whatever works, works. Which
ethical principle is Jason most likely using?
A. focus on the rights of individuals
B. pragmatism
C. utilitarianism (consequences)
D. focus on integrity (virtue ethics)
What is your reaction to the following statement made by many business
graduates? It may be nice to study ethics, but in the real world the only
thing that counts is money.
A list of commonly found ethical temptations and violations, including criminal acts.

3.
4.

5.

6.
7.

ANSWERS QUICK QUIZ

1.
2.
3.
4.

True
True
False
C
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5. B
6. The attitude that the only thing that counts is money is troublesome for several
reasons. First, job satisfaction is also a major contributor to a
persons welfare. Second, the unethical pursuit of money will sometimes
leave a person jobless or in jail. Third, not all business executives believe
that profit maximization is the sole purpose of business.
7.

ANSWERS TO ACTIVITIES
1
The prudential viewpoint begins with the individual involved, Thuy Nguyen. You want to keep
your job so that you can pay your bills and look after your daughter. People in the witness
protection program are often more prone to psychological stressthis would not be good for
your daughter as she develops. Such possible practical consequences would suggest that
you keep quiet and pretend nothing has happened.
If we extend the prudential viewpoint, then certain assumptions must be made about the
case. Will the prosecution be successful? Will your life be in danger? Even though there may
be good to others prudentially, it would be overridden by the possible negative effects to you.
Again, the prudential viewpoint seems clearly against taking any action: mums the word.
If we begin the ethical analysis with noncognitivism, then we must specify which culture we
are talking about when we analyze the language of morals. Is the language that of the
Vietnamese organized crime families? If so, then there is probably a code of looking the
other way so that the profits might be made. Is the language that of recent naturalized
Vietnamese citizens? How about naturalized citizens, in general? US citizens? It might make
a difference which community is chosen as being operative in this particular situation. Once
a choice is made, the analysis of the normative discourse within that sociological group will
be rather straightforward. Thus, it is possible to get a range of recommendations under this
approach (including some that are contradictory).
The same sort of dynamic might apply to contractarianism, intuitionism, or virtue ethics if one
were to understand the contract, ethical adages, or community values to be relative to the
sociological group chosen. In each case these anti-realist approaches will invoke a moral
relativism such that one would have to decide which community is primary and hang her hat
there.
The realist theories would operate differently. Utilitarianism would suggest an analysis
of how much harm illegal drugs cause people in that and other communities. We are
probably talking about tens of thousands of people who become addicts and have their lives
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torn apart. Thus we have a very large amount of pain multiplied by tens of thousands
(including your own brother). That is a pretty strong argument against continuing where you
are. You and your daughter count as two against many thousands.
You are deciding about taking on risk to save lives. It would seem that utilitarianism would
vote for your contacting the FBI.
Deontology would examine the relevant duties involved under some proper description of the
action. Some of the duties might include: Thuy has a duty to her daughter to raise her with
the basic goods of agency (such as she can), love, and moral training.
The first two are compatible with either choice, but the latter suggests contacting the
FBI. Thuy also has a duty to her profession: accounting. She must report accurately and not
distort reality for internal, selfish purposes. The goal is a transparent rendering
of operations. Her professional duty is to go to the FBI. Then there is her general duty
as a citizen of the USA. This is a duty to report violations of the law so that the purpose
of the law might be upheld: the conviction of the guilty and the acquittal of the innocent.
This duty also suggests reporting the companys activity to the FBI.

Both realist theories require Thuy to report what she has discovered as an accountant
to the FBI. (We are assuming that the option of Thuy going to her bosses to tell them
what she has discovered in order to get them to change would be rejected on prudential
grounds.)
Students are encouraged to try to take one of the moral theories and set out a decision
making scenario that involves both ethical and prudential criteria.
CHAPTER ROUNDUP

Business ethics is the application of general ethical ideas to business behaviour.

The history of Ethics starts in the seventeen century of which Utilitarianism - The
proponents were Jeremy Bentham (17481832) & John Stuart Mill (18061873) and
Utilitarian principle: An action is ethically right only if the sum total of utilities produced
by that act is greater than the sum total of utilities produced by any other act that
could have been performed in its place. Diverse in view was of the Kantian Ethics Proponent: Immanuel Kant (17241804) which focus on the care of duty, concerning
the means rather that the ends of Utilitarianism.

7 approaches are highlighted to solve business ethics problems.

Globalisation has made the handling of business ethics complex. This drives the
changing of the Stakeholder Theory outwards and environmental inclined.

REFERENCES
Essentials of Management, 9TH Edition Andrew J. DuBrin, 2006 South-Western, Cengage
Learning

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Business Ethics: Decision Making For Personal Integrity & Social Responsibility, 3rd Edition,
Laura P. Hartman, Joe DesJardins, Chris MacDonald, 2014, McGraw-Hill
Ethics: Discovering Right and Wrong, 7th Edition, Louis P. Pojman, West Point, James
Fieser, 2012, Cengage Learning

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