Lecture 3

Business Ethics
Ethical Principles in
Business
Learning Objectives
1. Understand different ethical frameworks.
2. Understand the ethical tradition of
utilitarianism and its criticism.
3. Explore the concept of right and its
different vantage points. To discuss the
criticism on this concept.
4. To understand the basics of Libertarian
philosophy.
Ethical Frameworks
 Utilitarianism: An ethical tradition that directs us to
decide based on overall consequences of our acts.

 Principle, Rights & Justice based framework: Directs us to

act on certain moral principles such as respecting human
rights.

 Virtue Ethics: Directs us to consider the moral character

of the individuals and how various character traits can
contribute to, or obstruct, a happy and meaningful
human life.
Utilitarianism
 Actions and policies should be evaluated on the
basis of the benefits and costs they will impose
on society.
 The only morally right action in any situation is
that whose utility is greatest by comparison to
the utility of all the other alternatives .
 Leading utilitarian theorists:
 Jeremy Bentham
 John Stuart Mill
Utilitarianism
 Advocates maximizing utility
 Matches well with moral evaluations of public
policies
 Appears intuitive to many people
 Helps
explain why some actions are generally
wrong and others are generally right
 Influenced economics
How to Apply Utilitarian Principles
 First, determine what alternative actions or
policies are available to me in that situation.
 Second, for each alternative action, estimate the
direct and indirect benefits and costs that the
action will probably produce for all persons
affected.
 Third, for each action, subtract the costs from the
benefits to determine the net utility of each action.
 Fourth, the action that produces the greatest sum
total of utility must be chosen as the ethically
appropriate course of action.
Challenge to Utilitarian Ethics
1. How to count, measure, compare and quantify
consequences?
 Calculation of consequences
 In which unit?
 Example: Non-renewable energy source
2. The end does not always justify the means
 Certain rights should not be violated
 Certain rules should be followed no matter what the
consequences are
 Contracts & promises should be honored
Criticisms of Utilitarianism
 Critics say not all values can be measured.
 Utilitarians respond that monetary or other commonsense
measures can measure everything.
 Critics say utilitarianism fails with rights and justice.
 Utilitarians respond that rule-utilitarianism (a form of utilitarianism
that limits utilitarian analysis to evaluations of moral rules) can
deal with rights and justice.
 Two-principles of rule utilitarianism:
1. An actions is right from an ethical point of view if and only if the
action would be required by those moral rules that are correct.
2. A moral rule is correct if and only if the sum total of utilities
produced if everyone were to follow that rule is greater than the
sum total of utilities produced if everyone were to follow some
The Concept of a Right
 Right = an individual’s entitlement to something.
 Legal right = An entitlement that derives from a legal
system that permits or empowers a person to act in a
specified way or that requires others to act in certain
ways toward that person.
 Moral (or human) rights = rights that all human beings
everywhere possess to an equal extent simply by virtue
of being human beings.
 Legal rights confer entitlements only where the particular
legal system is in force.
 Moral rights confer entitlements to all persons regardless
of their legal system.
Moral Rights

 Can be violated even when “no one is hurt”.

 Are correlated with duties others have toward
the person with the right.
 Provide individuals with autonomy and equality
in the free pursuit of their interests.
 Provide a basis for justifying one’s actions and
for invoking the protection or aid of others.
 Focus on securing the interests of the
individual unlike utilitarian standards which
focus on securing the aggregate utility of
everyone in society.
Three Kinds of Moral Rights

 Negative rights require others leave us alone.

Duties others have not to interfere in certain
activities of the person who holds the right.
 Positive rights require others help us. Duties of
other agents to provide the holder of the right
with whatever he or she needs to freely pursue
his or her interests.
 Contractual or special rights require others
keep their agreements.
Contractual Rights and Duties
 Createdby specific agreements and conferred only
on the parties involved.
 Requirepublicly accepted rules on what constitutes
agreements and what obligations agreements
impose.
 Underliethe special rights and duties imposed by
accepting a position or role in an institution or
organization.
 Require (1) the parties know what they are agreeing
to, (2) no misrepresentation, (3) no duress or
coercion,(4) no agreement to an immoral act.
Kant and Moral Rights

 Individuals generally must be left equally free

to pursue their interests.
 Moral rights identify the specific interests
individuals should be entitled to freely pursue.
 An interest is important enough to raise to be
a right if:
 we would not be willing to have everyone deprived
of the freedom to pursue that interest
 the freedom to pursue that interest is needed to
live as free and rational beings.
Kant’s Categorical
Imperative (First Version)
 We must act only on reasons we would be
willing to have anyone in a similar situation act
on.
 Requires universalizability and reversibility.
 Similar to questions:
 “What if everyone did that?”
 “How would you like it if someone did that to
you?”
Kant’s Categorical
Imperative (Second Version)
 Never use people only as a means to your
ends, but always treat them as they freely and
rationally consent to be treated and help them
pursue their freely and rationally chosen ends.
 Based on the idea that humans have a dignity
that makes them different from mere objects.
 Itis, according to Kant, equivalent to the first
formulation.
Criticisms of Kant

 Both versions of the categorical imperative are

unclear.
 Rights can conflict and Kant’s theory cannot
resolve such conflicts.
 Kant’stheory implies moral judgments that
are mistaken.
Challenges to an Ethics of Rights
& Duties
 No agreement on the scope and range of rights
 Who has the duty to provide those rights?
 For Example: Right to work
 What qualify as a right?
 Can wishes be right?

 Applying theory to real life situations

 Conflict between rights
Libertarian Philosophy
 Freedom from human constraint is necessarily good and that
all constraints imposed by others are necessarily evil except
when needed to prevent the imposition of greater human
constraints.
 Robert Nozick’s Libertarian Philosophy:
 the only moral right is the negative right to freedom which implies
that restrictions on freedom are unjustified except to prevent
greater restrictions on freedom
 the right to freedom requires private property, freedom of contract,
free markets, and the elimination of taxes to pay for social welfare
programs
 Since the freedom of one person always restricts the freedom of
others, Nozick’s claim that restrictions on freedom are unjustified
implies that freedom itself is unjustified.