Business Ethics, Anderson University DBA Fall 2001

Business Ethics Concepts & Cases

MANUEL G. VELASQUEZ
ABSTRACT
Summary of the main points of the first two chapters in the oo!" #he remainin$ chapters are
application of the concepts summari%ed as relatin$ to political forms of $overnment and mar!et
systems" #hese further chapters are less relevant to the DBA class that this summary was
prepared for"
Chapter 1 Ethics & Business
Ethics is the principles of conduct
governing an individual or a group. It is
the study of morality.
Morality are the standards that an
individual or group has about what is
right and wrong, or good and evil.
Moral norms can usually be expressed
as general rules or statements, such as
Always tell the truth. Moral values
can usually be expressed as statements
describing objects or features of objects
that have worth, such as Honesty is
good and Injustice is bad.
ive characteristics can help pin down
the nature of moral standards.
!. "oral standards deal with matters
that we thin# can seriously injure or
seriously benefit human beings.
$. "oral standards are not established
or changed by the decisions of
particular legislative bodies.
%. &e feel that moral standards should
be preferred to other values including
'especially() self*interest.
+. "oral standards are based on
impartial considerations. , that is, a
point of view that does not evaluate
standards according to whether they
advance the interests of a particular
individual or group, but one that goes
beyond personal interests to a
universal standpoint in which
everyone-s interests are impartially
counted as e.ual.
/. "oral standards are associated with
special emotions and a special
vocabulary.
Ethics is the discipline that examines
one-s moral standards or the moral
standards of a society. Ethics is the
study of moral standards , the process
of examining the moral standards of a
person or society to determine whether
these standards are reasonable or
unreasonable in order to apply them to
concrete situations and issues. 0he
ultimate aim of ethics is to develop a
body of moral standards that we feel are
reasonable to hold , standards that we
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have thought about carefully and have
decided are justified standards for us to
accept and apply to the choices that fill
our lives.
Although ethics is a normative study of
ethics, the social sciences engage in a
descriptive study of ethics. A normative
study aims to discover what should be. A
descriptive study attempts to describe or
explain the world without reaching any
conclusions about whether the world is
as it should be.
1.1 The Nature of Business Ethics
Business ethics concentrates on the
moral standards as they apply to business
policies, institutions, and behavior.
3usiness ethics, in other words, is a form
of applied ethics. It includes not only the
analysis of moral norms and moral
values, but also attempts to apply the
conclusions of this analysis to that
assortment of institutions, technologies,
transactions, activities, and pursuits that
we call business.
3usiness ethics investigates three
different #inds of issues4 systemic,
corporate, and individual. Systemic
issues in business ethics are ethical
.uestions raised about the economic,
political, legal, and other social systems
within which businesses operate.
Corporate issues in business ethics are
ethical .uestions raised about a particular
company. Individual issues in business
ethics are ethical .uestions raised about a
particular individual or particular
individuals within a company.
3ecause corporate acts originate in the
choices and actions of human
individuals, it is these individuals who
must be seen as the primary bearers of
moral duties and moral responsibility.
5onetheless, it ma#es perfectly good
sense to say that a corporate organi6ation
has moral duties and that it is morally
responsible for its acts.
0he fact that multinationals operate in
more than one country produces ethical
dilemmas for their managers that
managers of firms limited to a single
country do not face.
0he ability to shift its operations
between countries enables the
multinational to escape the social
controls that a single nation might
attempt to impose on the
multinational and can allow the
multinational to play one country
against another.
It can sometimes transfer raw
materials, goods and capital among
its plants in different countries at
terms that enable it to escape taxes
and fiscal obligations that companies
limited to a single nation must bear.
0hey often have the opportunity to
transfer a new technology or set of
products from a more developed
country into nations that are less
developed.
It is often faced with the .uandary of
deciding which of these different
norms and standards to implement in
its many operations.
Ethical relativism is the view that there
are no ethical standards that are
absolutely true and that apply or should
be applied to the companies and people
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of all societies. 0hus, the theory of
ethical relativism implies that whatever
the majority in our society believes about
morality is automatically correct. 0he
fundamental problem with ethical
relativism is that it holds that the moral
standards of a society are the only
criteria by which actions in that society
can be judged.
Almost all ethical issues raised by new
technologies are related in one way or
another to .uestions of ris#. "any of the
ethical issues new technologies have
created , especially information
technologies , are related to privacy.
Information technologies have also
raised difficult ethical issues about the
nature of the right to property when the
property in .uestion is information.
inally, biotechnology has created yet
another host of troubling ethical issues.
1.2 Moral Development & Moral
Reasoning
As people mature, they change their
values in very deep and profound ways.
0he ability to ma#e reasoned moral
judgments develops in identifiable stages
'7ohlberg).
A" *reconventional Sta$es
At these first two stages, the child is able to
respond to rules and social expectations and
can apply the labels of good, bad, right and
wrong. 0hese rules, however, are seen as
something externally imposed on the self.
!. *unishment and +edience
+rientation , At this stage, the
physical conse.uences of an act
wholly determine the goodness and
badness of that act.
$. ,nstrument and 'elativity
+rientation , At this stage, right
actions become those that can serve
as instruments for satisfying the
child-s needs of the needs of those
for whom the child cares.
B" -onventional Sta$es
"aintaining the expectations of one-s own
family, peer group, or nation is now seen as
valuable in its own right, regardless of the
conse.uences.
!. Interpersonal 8oncordance
9rientation , :ood behavior at this
early conventional stage is living to
the expectations of those for whom
one feel loyalty, affection, and
trust, such as family and friends.
$. .aw and +rder +rientation , ;ight
and wrong at this more mature
conventional stage now come to be
determined by loyalty to one-s own
larger nation or surrounding
society.
-" *ost -onventional, Autonomous, or
*rincipled Sta$es
At these stages, the person no longer simply
accepts the values and norms of the groups
to which he or she belongs. Instead the
person now tries to see situations from a
point of view that impartially ta#es
everyone-s interests into account.
!. Social -ontract +rientation , At
this first post*conventional stage
the person becomes aware that
people hold a variety of conflicting
personal views and opinions and
emphasi6es fair ways of reaching
consensus by agreement, contract,
and due process.
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$. <niversal =thical 1rinciples
9rientation , At this final stage,
right action comes to be defined in
terms of moral principles chosen
because of their logical
comprehensiveness, universality
and consistency.
Although people generally progress
through the stages in the same se.uence,
not everyone progresses through all the
stages. 7ohlberg has been critici6ed for
claiming that the higher stages are
morally preferable to the lower stages. It
fails to ade.uately trace out the pattern
of development of women. emales,
:illigan claimed, tend to see themselves
as part of a web of relationships. or
women, morality is primarily a matter of
caring and being responsible for
others with whom one is involved in
personal relationships, and not a matter
of adhering to impartial and impersonal
rules. "oral development for women is
mar#ed by progress toward more
ade.uate ways of caring and being
responsible for oneself and for others.
0his is called the care perspective.
Moral reasoning refers to the reasoning
process by which human behaviors,
institutions, or policies are judged to be
in accordance with or in violation of
moral standards. "oral reasoning always
involves two essential components4
!. An understanding of what reasonable
moral standards re.uire, prohibit,
value, or condemn> and
$. =vidence or information that shows
that a particular person, policy,
institution, or behavior has the #inds
of features that these moral standards
re.uire, prohibit, value, or condemn.
irst and primarily, moral reasoning
must be logical. All the unspo#en moral
and factual assumptions must be made
explicit, and both assumptions and
premises be displayed and subject to
criticism. ?econd, the factual evidence
cited in support of a person-s judgment
must be accurate, relevant, and complete.
0hird, the moral standards involved in a
person-s moral reasoning must be
consistent. 0he consistency re.uirement
is the basis of an important method of
showing that a given moral standard
must be modified or rejected4 the use of
counter examples or hypotheticals.
1.3 Arguments For and Against
Business Ethics
1ersons involved in business, they claim,
should single mindedly pursue the
financial interests of their firm and not
sidetrac# their energies or their firm-s
resources into going good wor#s. irst,
some have argued that in perfectly
competitive free mar#ets, the pursuit of
profit will y itself ensure that the
memers of society are served in the
most socially eneficial ways. irst, most
industrial mar#ets are not perfectly
competitive. ?econd, the argument
assumes that any steps ta#en to increase
profits will necessarily be socially
beneficial. 0hird, the argument assumes
that, by producing whatever the buying
public wants 'or values), firms are
producing what all the members of
society want, when in fact the wants of
large segments of society 'the poor and
disadvantaged) are not necessarily met
because they cannot fully participate in
the mar#etplace. ourth, the argument is
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essentially ma#ing a normative judgment
on the basis of some assumed but
unproved moral standards.
A loyal a$ent of his or her employer, the
manager has a duty to serve his or her
employer in whatever ways will advance
the employer-s self*interests. 0he loyal
agent argument relies on several
.uestionable assumptions. irst, the
argument tries to show, again, that ethics
does not matter by assuming an
unproved moral standard. ?econd, the
loyal agent argument assumes that there
are no limits to the manager-s duties to
serve the employer, when in fact, such
limits are an express part of the legal and
social institutions from which these
duties arise. 0he law of agency states
that, in determining whether or not the
orders of the client to the agent are
reasonable @ business or professional
ethics are to be considered, and in no
event would it be implied that an agent
has a duty to perform acts which are
illegal or unethical. 0hird, the loyal
agent argument assumes that if a
manager agrees to serve a firm, then this
agreement automatically justifies
whatever the manager does on behalf of
the firm.
A third #ind of objection is sometimes
made against bringing ethics into
business. 0his is the objection that to be
ethical it is enough for business people
merely to obey the law4 3usiness ethics
is essentially obeying the law. It is
wrong, however, to see law and ethics as
identical. "oreover, most ethicists agree
that all citi6ens have a moral obligation
to obey the law so long as the law does
not re.uire clearly unjust behavior. 0his
means that, in most cases, it is immoral
to brea# the law.
9ne way to argue that ethics should be
brought into business is simply by
pointing out that, because ethics should
govern all voluntary human activities
and because business is a voluntary
human activity, ethics should also govern
business.
3usiness activities, li#e any other human
activities, cannot exist unless the people
involved in the business and its
surrounding community adhere to some
minimal standards of ethics.
=thical considerations are consistent with
business pursuits, in particular the
pursuit of profit 'results have been
mixed, but no studies have found a
negative correlation).
A prisoners dilemma is a situation in
which two parties are each faced with a
choice between two options4 =ither
cooperate with the other party or do not
cooperate. rom the joint standpoint of
the parties involved, the best outcome in
a prisoner-s dilemma is for both parties
to cooperate in their agreement. In short,
when people must choose between
cooperating or not cooperating in rules or
agreements, and when each has more to
gain by not cooperating, then rational
self*interest suggests that people should
not cooperate in #eeping the rules or
agreements. 0he prisoner-s dilemma,
then, seems to show that the rational self*
interested person should be unethical in
business when there is something to be
gained through unethical behavior.
However, this conclusion is based on a
false assumption. &e have assumed so
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far that prisoner-s dilemma situations are
isolated interactions between people who
never interact again. 0his threat of future
retaliation ma#es it more rational for the
parties in a series of repeated exchanges
to cooperate than to try to ta#e advantage
of each other. 0he most important lesson
of the prisoner-s dilemma, then, is that
when people deal with each other
repeatedly, so that each can later retaliate
against or reward the other party,
cooperation is more advantageous than
continuously trying to ta#e advantage of
the other party.
3usiness interactions with employees,
customers, suppliers, and creditors are
repetitive and ongoing. 0he prisoner-s
dilemma argument, then, implies that,
over the long run and for the most part, it
is better to be ethical in business than to
be unethical.
inally, we should note that there is also
a good deal of evidence that most people
so value ethical behavior that they will
punish those whom they perceive to be
behaving unethically and reward those
who are perceived to be ethical.
1.4 Moral Responsibility & Blame
"oral reasoning, however, is sometimes
directed at a related but different #ind of
judgment4 determining whether a person
is morally responsible, or culpable, for
having done something wrong or for
having wrongfully injured someone. 0he
term moral responsibility is sometimes
used as an e.uivalent to moral duty or
moral obligation.
A person is morally responsible only for
those acts and their forseen injurious
effects 'a) which the person #nowingly
and freely performed or brought about
and which it was morally wrong for the
person to perform or bring about, or 'b)
which the person #nowingly and freely
failed to perform or prevent and which it
was morally wrong for the person to fail
to perform or prevent.
0wo conditions completely eliminate a
persons moral responsibility for
causing a wrongful injury4 '!) ignorance
and '$) inability. 0here are also several
mitigating factors that can lessen a
person-s moral responsibility depending
on the severity of the wrong. "itigating
factors include 'a) circumstances that
leave a person uncertain but not
altogether unsure about what he or she is
doing 'these affect the person-s
#nowledge)> 'b) circumstances that ma#e
it difficult but not impossible for the
person to avoid doing it 'these affect the
person-s freedom)> 'c) circumstances that
minimi6e but not completely remove a
person-s involvement in an act 'these
affect the degree to which the person
actually caused or helped to cause the
wrongful injury). 0hese can lessen a
person-s responsibility for wrongdoing
depending on a fourth factor4 the
seriousness of the wrong.
&ho is morally responsible for jointly
produced acts( 0he traditional view is
that those who #nowingly and freely did
what was necessary to produce the
corporate act are each morally
responsible.
8ritics of the traditional view of the
individual-s responsibility for corporate
acts have claimed that the corporate
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group and not the individuals who ma#e
up the group must be held responsible
for the act. 0he law typically attributes
the acts of a corporation-s managers to
the corporate 'so long as the managers
act within their authority) and not to the
managers as individuals. 3ecause
individuals are morally responsible for
the #nown and intended conse.uences of
their free actions, any individual who
#nowingly and freely joins his actions
together with those of others, intending
thereby to bring about a certain corporate
act, will be morally responsible for that
act. 0he excusing factors of ignorance
and inability, which are endemic to
large*scale bureaucratic corporate
organi6ations, will completely eliminate
a person-s moral responsibility.
"oreover, depending on the seriousness
of the act, the mitigating factors of
uncertainty, difficulty, and minimal
involvement can also diminish a person-s
moral responsibility for a corporate act.
It is clearly mista#en, however, to thin#
that an employee who freely and
#nowingly does something wrong is
absolved of all responsibility when he or
she is following orders.
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Chapter 2 Ethical Principles in
Business
Cudgments about justice are based on
moral principles that identify fair ways
of distributing benefits and burdens
among the members of a society.
Cudgments about violations of people-s
rights are based on moral principles that
indicate the areas on which people-s
rights to freedom and well*being must be
respected.
A utilitarian standard of morality> a
moral principle, that is, that claims that
something is right to the extent that it
diminishes social costs and increases
social benefits. An ethic of care is an
ethic that emphasi6es caring for the
concrete well*being of those near to us.
=valuations of the moral character of
persons or groups are based on what is
called an ethic of virtue.
2.1 Utilitarianism: Weighing Social
Costs and Benefits
?electing the course of action that would
have the most beneficial conse.uences is
sometimes referred to as a
consequentialist approach and
sometimes as a utilitarian approach.
Utilitarianism is a general term for any
view that holds that actions and policies
should be evaluated on the basis of the
benefits and costs they will impose on
society. "any business analysts hold that
the best way to evaluate the ethical
propriety of a business decision , or any
other decision , is by relying on
utilitarian costDbenefit analysis.
Ceremy 3entham '!B+2*!2%$) is
generally considered the founder of
traditional utilitarianism. 0he utilitarian
principle holds that4 An action is right
from an ethical point of view if and only
if the sum total of utilities produced by
that act is greater than the sum total of
utilities produced by any other act the
agent could have performed in its place.
0he utilitarian principle assumes that we
can somehow measure and add the
.uantities of benefits produced by an
action and subtract from them the
measured .uantities of harm the action
will have. 3oth the immediate and all
foreseeable future costs and benefits that
each alternative will provide for each
individual must be ta#en into account as
well as any significant indirect effects.
0hree steps are performed4
!. Eetermine what alternative actions or
policies are available to me on that
occasion.
$. or each alternative action, estimate
the direct and indirect benefits and
costs that the action would produce
for each and every person affected by
the action in the foreseeable future.
%. 0he alternative that produces the
greatest sum total of utility must be
chosen as the ethically appropriate
course of action.
<tilitarian views have been highly
influential in economics and is the basis
of the techni.ues of economic cost*
benefit analysis.
Problems with Utilitarianism
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!. Eifficulties encountered measuring.
$. ?ome benefits and costs seem
intractable to measurement 'health).
%. 3ecause many of the benefits and
costs of an action cannot easily be
predicted, they also cannot be
ade.uately measured.
+. It is unclear exactly what is to count
as a benefit and what is to count as a
cost.
/. 0he assumption that all goods are
measurable implies that all goods can
be traded for e.uivalents of each
other.
Relies to the Problems o!
Utilitarianism
<tilitarianism merely insists that the
conse.uences of any projected act be
expressly stated with as much clarity
and accuracy as is humanly possible,
and that all relevant information
concerning these conse.uences be
presented in a form that will allow
them to be systematically compared
and impartially weighed against each
other. =xpressing this information in
.uantitative terms facilitates such
comparisons and weightings.
However, where .uantitative data are
unavailable, one my legitimately rely
on shared and common sense
judgments of the comparative values
things have for most people.
?everal common*sense criteria can be
used to determine the relative values
that should be given to various
categories of goods. Instrumental
goods are things that are considered
valuable only because they lead to
other good things. Intrinsic goods,
however, are things that are desirable
independent of any other benefits
they may produce.
Fou can weigh goods between needs
and wants.
A standard objection against using
monetary values to measure all costs
and benefits is that some goods, in
particular health and life, cannot be
priced. 0he utilitarian may argue,
however, that not only is it possible
to put a price on health and life, but
that we do so almost daily 'ex. the
cost of safety e.uipment in a car).
Ri"hts an# $%sti&e ' Problems with
Utilitarianism
0he major difficulty with utilitarianism,
according to some critics, is that it is
unable to deal with two #inds of moral
issues4 those relating to rights and those
relating to justice. 0hat is, the utilitarian
principle implies that certain actions are
morally right when in fact they are unjust
or violate people-s rights. It can also go
wrong, when it is applied to situations
that involve social justice.
Relies to the Problems with Ri"hts
an# $%sti&e
<tilitarians have proposed an important
and influential alternative version of
utilitarianism call ruleutilitarianism.
0he basic strategy of the rule*utilitarian
is to limit utilitarian analysis to the
evaluations of moral rules. According to
the rule*utilitarian, whey trying to
determine whether a particular action is
ethical, one is never supposed to as#
whether that particular action will
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produce the greatest amount of utility.
Instead, one is supposed to as# whether
the action is re.uired by the correct
moral rules that everyone should follow.
If the action is re.uired by such rules,
then one should carry out the action. 3ut
what are the correct moral rules( It is
only this second .uestion, according to
the rule*utilitarian, that is supposed to be
answered by reference to maximi6ing
utility. 0he correct moral rules are those
that would produce the greatest amount
of utility if everyone were to follow
them.
!. An action is right from an ethical
point of view if and only if the action
would be re.uired by those moral
rules that are correct.
$. 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 utilities
produced if everyone were to follow
some alternative rule.
0here are two main limits to utilitarian
methods of moral reasoning, therefore,
although the precise extent of these
limits is controversial. irst, utilitarian
methods are difficult to use when dealing
with values that are difficult and perhaps
impossible to measure .uantitatively.
?econd, utilitarianism by itself seems to
deal inade.uately with situations that
involve rights and justice, although some
have tried to remedy this deficiency by
restricting utilitarianism to the evaluation
of rules.
2.2 Rights and Duties
In general, a right is an individual-s
entitlement to something. If it derives
from a legal system, it is a legal right.
Hegal rights are limited to the particular
jurisdiction within which the legal
system is in force. Moral rights or
human rights are based on moral norms
and principles that specify that all human
beings are permitted or empowered to do
something or are entitled to have
something done for them.
&ays that we use the term a right4
0o indicate the mere absence of
prohibitions against pursuing some
interest or activity.
0o indicate that a person is
authori6ed or empowered to do
something either to secure the
interests of others or to secure one-s
interests.
0o indicate the existence of
prohibitions or re.uirements on
others that enable the individual to
pursue certain interests or activities.
0he most important moral rights are
rights that impose prohibitions or
re.uirements on others and that thereby
enable individuals to choose freely
whether to pursue certain interests or
activities.
&ays that we use the term moral rights4
0ightly correlated with duties. 0his is
because one person-s moral right
generally can be defined , at least
partially , in terms of the moral
duties other people have toward that
person.
1rovide individuals with autonomy
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and e.uality in the free pursuit of
their interests.
1rovide a basis for justifying one-s
actions and for invo#ing the
protection or aid of others.
3ecause moral rights have these features,
they provide bases for ma#ing moral
judgments that differ substantially from
utilitarian standards. irst, moral rights
express the re.uirements of morality
from the point of view of the individual,
whereas utilitarianism expresses the
re.uirements of morality from the point
of view of society as a whole. ?econd,
rights limit the validity of appeals to
social benefits and to numbers.
A large group of rights called negative
rights is distinguished by the fact that its
members can be defined wholly in terms
of the duties others have to not interfere
in certain activities of the person who
holds a given right.
In contrast, positive rights do more than
impose negative duties. 0hey also imply
that some other agents 'it is not always
clear who) have the positive duty of
providing the holder of the right with
whatever he or she needs to freely pursue
his or her interests.
Contractual rights and duties
'sometimes called special rights and
duties or special obligations) are the
limited rights and correlative duties that
arise when one person enters an
agreement with another person.
8ontractual rights and duties are
distinguished4
3y the fact that they attach to specific
individuals and the correlative duties
are imposed only on other specific
individuals.
Arise out of a specific transaction
between particular individuals.
Eepend on a publicly accepted
system of rules that define the
transactions that give rise to those
rights and duties.
0he ethical rules that govern contracts4
3oth of the parties to a contract must
have full #nowledge of the nature of
the agreement they are entering.
5either party to a contract must
intentionally misrepresent the facts of
the contractual situation to the other
party.
5either party to the contract must be
forced to enter the contract under
duress or coercion.
0he contract must not bind the parties
to an immoral act.
7ant-s theory is based on a moral
principle that he calls the categorical
imperative and that re.uires that
everyone should be treated as a free
person e.ual to everyone else. 7ant-s
first formulation of the categorical
imperative is as follows4 I ought never
to act except in such a way that I can also
will that my maxim should become a
universal law. An action is morally
right for a person in a certain situation if,
and only if, the person-s reason for
carrying out the action is a reason that he
or she would be willing to have every
person act on, in any similar situation.
0he first formalation of the categorical
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imperative, then, incorporates two
criteria for determining moral right and
wrong4
<niversali6ability4 0he person-s
reasons for acting must be reasons
that everyone could act on at least in
principle.
;eversibility4 0he person-s reasons
for acting must be reasons that he or
she would be willing to have all
others use, even as a basis of how
they treat him or her.
0he second formulation 7ant gives of
the categorical imperative is this4 Act in
such a way that you always treat
humanity, whether in your own person or
in the person of any other, never simply
as a means, but always at the same time
as an end. 9r never treat people only as
means, but always also as ends. An
action is morally right for a person if,
and only if, in performing the action, the
person does not use others merely as a
means for advancing his or her own
interests, but also both respects and
develops their capacity to choose freely
for themselves.
A large number of authors have held that
the categorical imperative 'in one or the
other of its formulations) explains why
people have moral rights.
Human beings have a clear interest in
being helped by being provided with
the wor#, food, clothing, housing,
and medical care they need to live on
when they cannot provide these for
themselves.
Human beings also have a clear
interest in being free from injury or
fraud and in being free to thin#,
associate, spea#, and live privately as
they choose.
Human beings have a clear interest in
preserving the institution of contracts.
1roblems with 7ant4
7ant-s theory is not precise enough to
always be useful.
Although we might be able to agree
on the #inds of interests that have the
status of moral rights, there is
substantial disagreement concerning
what the limits of each of these rights
are and concerning how each of these
rights should be balanced against
other conflicting rights.
0here are counterexamples that show
the theory sometimes goes wrong.
0he Hibertarian 9bjection4 5o6ic#. 0he
American philosopher ;obert 5o6ic#
claims that the only basic right that every
individual possesses is the negative right
to be free from the coercion of other
human beings. 5o6ic# and other
libertarians pass too .uic#ly over the fact
that the freedom of one person
necessarily imposes constraints on other
persons.
$%sti&e an# (airness
Issues involving .uestions of justice and
fairness are usually divided into three
categories4
!istributive justice, the first and
basic category, is concerned with the
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fair distribution of society-s benefits
and burdens.
"etributive justice refers to the just
imposition of punishments and
penalties on those who do wrong.
Compensatory justice concerns the
best way of compensating people for
what they lost when they were
wronged by others.
#he principle of distributive justice4
Individuals who are similar in all
respects relevant to the #ind of treatment
in .uestion should be given similar
benefits and burdens, even if they are
dissimilar in other irrelevant respects>
and individuals who are dissimilar in a
relevant respect ought to be treated
dissimilarly, in proportion to their
dissimilarity. It is based on the purely
logical idea that we must be consistent in
the way we treat similar situations.
$%sti&e as E)%alit*+ E"alitarianism
Egalitarians hold that there are no
relevant differences among people that
can justify une.ual treatment. =very
person should be given exactly e.ual
shares of a society-s or a group-s benefits
and burdens.
Criti&isms o! E"alitarians+
0here is no .uality that all human
beings possess in precisely the same
degree.
0he egalitarian ignores some
characteristics that should be ta#en
into account in distributing goods
both in society and in smaller groups4
need, ability and effort.
?ome egalitarians have tried to
strengthen their position by
distinguishing two different #inds of
e.uality4 political e.uality and economic
e.uality. 1olitical e.uality refers to an
e.ual participation in, and treatment by,
the means of controlling and directing
the political system. 0his includes e.ual
rights to participate in the legislative
process, e.ual civil liberties, and e.ual
rights to due process. =conomic e.uality
refers to e.uality of income and wealth
and e.uality of opportunity.
0hus, they have argued that every person
has a right to a minimum standard of
living and that income and wealth should
be distributed e.ually until this standard
is achieved for everyone. 0he economic
surplus that remains after everyone has
achieved the minimum standard of living
can then be distributed une.ually
according to need, effort and so on.
$%sti&e Base# on Contrib%tion+
Caitalist $%sti&e
Effort4 3enefits should be distributed
according to the value of the contribution
the individual ma#es to a society, a tas#,
a group, or an exchange. 0he main
.uestion raised by the contributive
principle of distributive justice is how
the value of the contribution of each
individual is to be measured 'based on
$or% effort). 0o reward a person-s
efforts without any reference to whether
the person produces anything worthwhile
through these efforts is to reward
incompetence and inefficiency.
&roductivity4 the better the .uality of a
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person-s contributed product, the more
he or she should receive. 0his ignores
people-s needs. It is difficult to place any
objective measure on the value of a
person-s product, especially in fields
such as the sciences, the arts,
entertainment, athletics, education,
theology, and health care.
Supply and !emand4 0he value of a
person-s product should be determined
by the mar#et forces of supply and
demand. <nfortunately this method of
measuring the value of a person-s
product still ignores people-s needs.
$%sti&e base# on Nee#s an# Abilities+
So&ialism
irst proposed by Houis 3lanc '!2BI*
!G$+) rom each according to his
ability, to each according to his needs.
0he socialist principal4 wor# burdens
should be distributed according to
people-s abilities, and benefits should be
distributed according to people-s needs.
irst there would be no relation between
the amount of effort a wor#er puts forth
and the amount of remuneration one
receives 'because remuneration would
depend on need, not on effort). Human
nature is essentially self*interested and
competitive and so outside the family
people cannot be motivated by the
faternal willingness to share and help
that is characteristic of families. If the
socialist principle were enforced, it
would obliterate individual freedom. 0he
occupation each person entered would be
determined by the person-s abilities and
not by his or her free choice.
$%sti&e as (ree#om+ Libertarianism
rom each according to what he chooses
to do, to each according to what he
ma#es for himself 'perhaps with the
contracted aid of others) and what others
choose to do for him and choose to give
him of what they-ve been given
previously 'under this maxim) and
haven-t yet expended or transferred.
9bviously, this means it would be wrong
to tax one person to provide welfare
benefits for someone else-s needs. 0his
would generate unjust treatment of the
disadvantaged.
$%sti&e as (airness+ Rawls
0he distribution of benefits and burdens
in a society is just if and only if4
A. =ach person has an e.ual right to
the most extensive basic liberties
compatible with similar liberties
for all, and
3. ?ocial and economic ine.ualities
are arranged so that they are both4
!. 0o the greatest benefit of
the least advantaged
persons
$. Attached to offices and
positions open to all under
conditions of fair e.uality
of opportunity
1rinciple A is supposed to ta#e priority
over 1rinciple 3 should the two of them
ever come into conflict, and within
1rinciple 3, 1art $ is supposed to ta#e
priority over 1art !.
1rinciple A is called the principle of
equal liberty4 each citi6en-s liberties
must be protected from invasion by
others and must be e.ual to those of
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others. 0hese basic liberties include the
right to vote, freedom of speech and
conscience and other civil liberties,
freedom to hold personal property, and
freedom from arbitrary arrest.
1art ! of 1rinciple 3 is called the
difference principle. It assumes that a
productive society will incorporate
ine.ualities, but it then asserts that steps
must be ta#en to improve the position of
the most needy members of society,
unless such improvements would so
burden society that they ma#e everyone,
including the needy, worse off than
before.
1art $ of 1rinciple 3 is called the
principle of fair equality of opportunity4
everyone should be given an e.ual
opportunity to .ualify for the more
privileged positions in society-s
institutions.
Retrib%ti,e $%sti&e
"etributive justice concerns the justice
of blaming or punishing persons for
doing wrong. "ore relevant to our
purposes is the .uestion of the conditions
under which it is just to punish a person
for doing wrong. "ajor conditions under
which a person could not be held
responsible include ignorance and
inability. A second #ind of condition of
just punishments is certitude that the
person being punished actually did the
wrong. A third #ind of condition of just
punishments is that they must be
consistent and proportioned to the
wrong.
Comensator* $%sti&e
8ompensatory justice concerns the
justice of restoring to a person what the
person lost when he or she was wronged
by someone else. 0raditional moralists
have argued that a person has a moral
obligation to compensate an injured
party only if three conditions are present4
!. 0he action that inflicted the injury
was wrong or negligent.
$. 0he person-s action was the real
cause of the injury.
%. 0he person inflicted the injury
voluntarily.
0he most controversial forms of
compensation undoubtedly are the
preferential treatment programs that
attempt to remedy past injustices against
groups.
Partialit* an# Care
0his view , that we have an obligation to
exercise special care toward those
particular persons with whom we have
valuable close relationships, particularly
relations of dependency , is a #ey
concept in an ethic of care. 0hus, an
ethic of care emphasi6es two moral
demands4
&e each exist in a web of
relationships and should preserve and
nurture those concrete and valuable
relationships we have with specific
persons.
&e each should exercise special care
for those with whom we are
concretely related by attending to
their particular needs, values, desires,
and concrete well*being as seen from
their own personal perspective, and
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by responding positively to these
needs, values, desires, and concrete
well*being, particularly of those who
are vulnerable and dependant on our
care.
A communitarian ethic is an ethic that
sees concrete communities and
communal relationships as having a
fundamental value that should be
preserved and maintained. ?econd, it is
important to recogni6e that the demands
of caring are sometimes in conflict with
the demands of justice. It has been
claimed that an ethic of care can
degenerate into unjust favoritism. Its
demands can lead to burnout due to the
sacrifice of their own needs and desires
to care for the well*being of others.
2.5 Integrating Utility, Rights,
Justice and Caring
<tilitarian standards must be used when
we do not have the resources to attain
everyone-s objectives, so we are forced
to consider the net social benefits and
social costs conse.uent on the actions by
which we can attain these objectives.
"oral reasoning of this type forces
consideration of whether the behavior
respects the basic rights of the
individuals involved and whether the
behavior is consistent with one-s
agreements and special duties.
0hird, our moral judgments are also in
part based on standards of justice that
indicate how benefits and burdens should
be distributed among the members of a
group.
ourth, our moral judgments are also
based on standards of caring that indicate
the #ind of care that is owed to those
with whom we have special concrete
relationships.
This s%""ests that moral reasonin"
sho%l# in&ororate all !o%r -in#s o!
moral &onsi#erations. altho%"h onl*
one or the other ma* t%rn o%t to be
rele,ant or #e&isi,e in a arti&%lar
sit%ation. /ne simle strate"* !or
ens%rin" that all !o%r -in#s o!
&onsi#erations are in&ororate# into
one0s moral reasonin" is to in)%ire
s*stemati&all* into the %tilit*. ri"hts.
1%sti&e an# &arin" in,ol,e# in a "i,en
moral 1%#"ment. As- a series o!
)%estions abo%t an a&tion that one is
&onsi#erin"+
2. 3oes the a&tion. as !ar as ossible.
ma4imi5e so&ial bene!its an#
minimi5e so&ial in1%ries6
7. 8s the a&tion &onsistent with the
moral ri"hts o! those whom it will
a!!e&t6
9. :ill the a&tion lea# to a 1%st
#istrib%tion o! bene!its an#
b%r#ens6
;. 3oes the a&tion e4hibit aroriate
&are !or the well<bein" o! those who
are &losel* relate# to or #een#ent
on onesel!6
Moral
Stan#ar#s
(a&t%al
8n!ormation
Moral
$%#"ment
"aximi6e
social utility
;espect moral
rights
Eistribute
8oncerning
the policy,
institution, or
behavior
under
consideration
9n the
rightness or
wrongness of
the policy,
institution, or
behavior
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benefits and
burdens justly
=xercise
caring
The Nat%re o! Virt%e
A moral virtue is an ac.uired disposition
that is valued as part of the character of a
morally good human being and that is
exhibited in the person-s habitual
behavior. A person has a moral virtue
when the person is disposed to behave
habitually in the way and with the
reasons, feelings, and desires that are
characteristic of a morally good person.
The Moral Virt%es
:ree# philosopher Aristotle argued that a
moral virtue is a habit that enables a
human being to act in accordance with
the specific purpose of human beings.
?t. 0homas A.uinas, followed Aristotle
in holding that the moral virtues enable
people to follow reason in dealing with
their desires, emotions and actions and in
accepting that the four pivotal or cardinal
moral virtues are courage, temperance,
justice, and prudence. A.uinas added
the theological or 8hristian virtues of
faith, hope and charity , the virtues that
enable a person to achieve union with
:od.
Virt%es. A&tions an# 8nstit%tions
'irtue theory argues that the aim of the
moral life is to develop those general
dispositions we call the moral virtues,
and to exercise and exhibit them in the
many situations that human life sets
before us.
An action is morally right if in carrying
out the action the agent exercises,
exhibits, or develops a morally virtuous
character, and it is morally wrong to the
extent that by carrying out the action the
agent exercises, exhibits, or develops a
morally vicious character.
Virt%es an# Prin&iles
Hence, there is no conflict between
theories of ethics that are based on
principles and theories of ethics based on
virtues. An ethic of virtue is not a fifth
#ind of moral principle that should ta#e
its place alongside the principles of
utilitarianism, rights, justice and caring.
Instead, an ethics of virtue fills out and
adds to these four by loo#ing not at the
actions people are re.uired to perform,
but at the character they are re.uired to
have.
2.7 Morality in International
Contexts
?ome have claimed that, when operating
in less developed countries,
multinationals from more developed
home countries should always follow
those practices prevalent in the more
developed country, which set higher or
more stringent standards. 3ut this claim
ignores that introducing practices that
have evolved in a highly developed
country into one that is less developed
may produce more harm than good.
?ome have gone to the opposite extreme
and argued that multinationals should
always follow local practices, whatever
they may be, or that they should do
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Business Ethics, Anderson University DBA Fall 2001
whatever the local government wants,
because it is the representative of the
people. 3ut it is sometimes unethical to
go along with local practices or
government re.uirements as it
sometimes is to oppose them.
0he foregoing discussion suggests that
the following .uestions should be as#ed
about any corporate action or policy
under consideration by a company
operating in a foreign country4
!. &hat does the corporate policy or action
really mean in the context of the local
culture( &hen viewed in terms of its local
cultural meaning, is the policy or action
ethically acceptable, or does it violate the
ethical standards of utilitarianism, rights,
justice, and caring to such an extent that it
should not be underta#en( rom the
perspective of virtue, does the action or
policy encourage the exercise or the
development of morally good character(
$. 0a#ing into account the nation-s level of
technological, social and economic
development and what its government is
doing to promote this development, does the
corporate policy or action produce
conse.uences that are ethically acceptable
from the point of view of utilitarianism,
rights, justice and caring, or from the point
of view of moral character( 8an the more
stringent legal re.uirements or practices
common in more developed nations be
implemented without damage to the host
country and its development, and in context
would such implementation be more
consistent with the ethical standards of
utilitarianism, rights, justice, and caring(
&ould such implementation encourage the
exercise or the development of morally good
character(
%. If the corporate action or policy is allowed
or re.uired by the laws or the decrees of the
local government, does this government
truly represent the will of all its people(
Eoes the corporate action or policy
nevertheless violate the principles of
utilitarianism, rights, justice or caring, or is
it condemnable from the perspective of
moral character( If so, and if the action or
policy is legally re.uired to do business in
the host country, then is the ethical violation
significant enough to re.uire withdrawal
from that country(
+. If the corporate action or policy involves a
local common practice that is morally
.uestionable by home country standards
'such as sexual discrimination or bribery of
government personnel), is it possible to
conduct business in the host country without
engaging in the practice( If not, then does
the practice violate the principles of
utilitarianism, rights, justice, and caring to a
degree significant enough to re.uire
withdrawal from that country( Is the
practice so pernicious from the perspective
of moral character as to re.uire withdrawal
from the country(
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