Chapter Three

Theory of Ethics
1

Melaku Beshaw (MBA)

Arba Minch, Ethiopia

 1. Theories/ Views Of Ethics
 Ethics has always been a concern for society and its various
institutions/stakeholders.

 Because different scholars have different perspectives about ethics

due to their working conditions and professions, there are many
views about ethics.

 Even though it is too difficult to put only limited views of ethics,

we have used the following views of ethics for the purpose of this
course.
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 A. The Utilitarian View Of Ethics

 This approach espoused by Jeremy Bentham and John Stuart Mill, holds

that moral behavior produces the greatest good for the greatest
number.

 The utilitarian ethic focuses on the distribution of benefits and harms

to all stakeholders with the view to maximizing benefits.

 Under this approach, a decision maker is expected to consider the effect

of each decision alternative on all parties and select the one that
optimizes the satisfaction for the greatest number of people.
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Utilitarianism is used frequently when business Simple cost-benefits
leaders make critical decisions about things analysis is not a utilitarian
like expansion, store closings, hiring, and calculus unless it includes
layoffs. consideration of all
stakeholders and a full
 Utilitarian decision making relies on a systematic
accounting of
comparison of the costs and benefits to all affected
externalities, worker
parties.
preferences, potentially
 Using such a cost–benefit analysis, a utilitarian
coercive actions related to
decision maker calculates the utility of the
customers, or community
consequences of all possible alternatives and then
and environmental
selects the one that results in the greatest benefit.
effects. 4
B. The Rights/Individualism View Of Ethics
 Given human nature, it is difficult-if not impossible-to eliminate self-
interest.

 The individual rights ethic relies on a list of agreed-upon rights for

everyone that will be upheld by everyone and that becomes the basis for
deciding what is right, just, or fair.

 The rights view of ethics says that ethical decisions are concerned with
respecting and protecting individual liberties and privileges such as
the rights of privacy, freedom of conscience, free speech, life and
safety, and due process.

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 Right views of ethics based on behaviour maintain the Right ethics; the view that
fundamental rights of all human being human rights – not a good

 There are six moral rights that should be considered sequences – are
during decision making according to this view. fundamentals.

 They are:

 The right of free consent:

 The right to privacy:

 The right of freedom of conscience:

 The right of free speech:

 The right to due process:

 The right to life and safety:

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 C. The Theory Of Justice View Of Ethics
 The theory of justice view of ethics states that decision makers seek to

impose and enforce rules fairly and impartially.

 The justice approach holds that moral decisions must be based on

standards of equity, fairness, and impartiality.

 Justice as it is applied in business ethics involves evaluations of fairness

or the disposition to deal with perceived injustices of others.

 Justice is fair treatment and due reward in accordance with ethical or

legal standards.
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 Three types of justice provide a framework for evaluating the

fairness of different situations.

 These are

 Distributive justice,

 Procedural justice, and

 Interactional justice.
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 D. Integrative-social Contracts Theory
 Integrative social contracts theory proposes that ethical decisions should be

based on empirical (what is) and normative (what should be) factors.

 This view is based on the integration of two “contracts” the general social contract

and a more specific contract among members of a specific community that might
be affected by a decision.

 The term “integrative” is used to illustrate that ISCT is based on a hypothetical

social contract whose terms allow for the generation of binding ethical obligations
through the recognition of actual norms created in real social and economic
communities.
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 2. Ethical Egoism & Subjectivism
Ethical Egoism Ethical Subjectivism
 Egoism defines right or acceptable behavior  Ethical subjectivism argues that no ethical
in terms of its consequences for the theory is objectively true. Statements
individual. They believe that they should
contained in those theories, such as the duty to
make decisions that maximize their own
act in one’s self interest, are only true as
self-interest, which is defined differently by
long as they are believed by the person
each individual.
holding the theory. Therefore, ethics
 The egoist ‘s creed generally can be stated as
becomes less a matter of what is objectively
“Do the act that promotes the greatest good
true and more a matter of individual
for oneself”.
perception.
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 Cont’d Cont’d
 Ethical subjectivist would argue that those
 Many believe that egoistic people and
supposedly objective justifications are really
companies are inherently unethical,
just subjective statements of the person’s
are short-term oriented, and will take
values and desires.
advantage of any opportunity.
 If Person A believes it is morally right to keep
 For example, if you would benefit
100,000 instead of donating it to charity, then
more from keeping 100,000 than you
for Person A that is the ethical thing to do.
would from donating it to charity
However, if Person B believes donating the
then the morally correct decision
money to others would be ethically correct
would be to keep the money for
then for Person B that is the correct ethical
yourself if you are an ethical egoist.
decision.
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 Cont’d Cont’d

 Ethical egoism contends each person has a  People have different opinions, but where
duty to act in ways that promote his or her morality is concerned, there are no ʺfactsʺ
self-interest above the interests of all
and no one is ʺrightʺ. People just feel
others. When a moral decision must be
differently, and that’s the end of it. This is
made, the person should exclusively
the basic thought behind Ethical
consider how the results will benefit him or
her. Subjectivism.

 However, there is also enlightened egoism.  Ethical Subjectivism is the idea that our

Enlightened egoists take a long-range moral opinions are based on our feelings
perspective and allow for the well-being and nothing more. On this view, there is
of others although their own self-interest
no such thing as ʺobjectiveʺ right or
remains paramount.
wrong. 13
 Cont’d Cont’d
 An example of enlightened  Ethical subjectivism contends
egoism is helping a turtle across that objective concepts of good
a highway because, if killed, the and evil or right and wrong do
person would feel distressed. not exist.
 To feel good, or eliminate the  This leads into other theories
chance of a feeling of distress, such as moral relativism which
the person helps the turtle to suggests these concepts are
cross the road. determined by agreement.

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 3. Principles of Business Ethics
 In today ‘s ultra-competitive, high tech, interdependent business world,

charisma without conscience and cleverness without character is a recipe for

economic and personal failure of marathon proportions.

 Competitiveness, ambition and innovation will always be important to success

but they must be regulated by core ethical principles like the ones described
below.

 Ethical principles are universal standards of right and wrong prescribing the

kind of behavior an ethical company or person should and should not engage in.
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 Principles is characterized by its being permanent or remain constant, work

anywhere, when violated produce destruction and contain inherent

judgment.

 In business, how people judge your character is critical to sustainable

success because it is the basis of trust and credibility. Abraham Lincoln

described “character as the tree and reputation as the shadow”.

Thus, your reputation is purely a function of perceptions while your

character is determined and defined by your actions (i.e., Whether
your actions are honorable and ethical according to the 12 ethical
principles):
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 1) Honesty: 2) Integrity:
Ethical executives do not deliberately Ethical executives earn the trust of others

mislead or deceive others by through personal integrity.

misrepresentations, overstatements,
Integrity refers to a wholeness of
partial truths, selective omissions, or any
character demonstrated by consistency
other means and when trust requires it, they
between thoughts, words and actions.
supply relevant information and correct

misapprehensions of fact.

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 3) Promise-Keeping: 4) Loyalty:
Ethical executives can be trusted because Ethical executives justify trust by being
they make every reasonable effort to fulfill loyal to their organization and the people
the letter and spirit of their promises and they work with.
commitments.
Ethical executives place a high value on
They do not interpret agreements in an protecting and advancing the lawful and
unreasonably technical or legalistic
legitimate interests.
manner.

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 5) Fairness: 6) Caring:
Ethical executives are fundamentally Ethical executives are caring,
committed to fairness. compassionate, benevolent and kind.

Ethical executives manifest a Ethical executives seek to accomplish

commitment to justice, the equal their business objectives in a manner that
treatment of individuals, tolerance for
causes the least harm and the greatest
and acceptance of diversity.
positive good.

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 7. Respect for Others:
8) Law abiding:
Ethical executives demonstrate respect for
the human dignity, autonomy, privacy, Ethical executives abide by laws, rules and
rights, and interests of all those who have a
regulations relating to their business
stake in their decisions; they are courteous
activities.
and treat all people with equal respect and
dignity regardless of sex, race or national
origin.

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 9) Commitment to Excellence 10) Leadership:
Ethical executives pursue excellence in Ethical executives are conscious of the

performing their duties, are well- responsibilities and opportunities of

informed and prepared, and constantly their position of leadership and seek to be

endeavor to increase their proficiency in positive ethical role models by their own
conduct and by creating a good
all areas of responsibility.
environment.

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11) Reputation and Morale: 12) Accountability:

Ethical executives understand the Ethical executives acknowledge and accept

importance of their own and their personal accountability for the ethical
company’s reputation as well as the quality of their decisions and omissions to
importance of the pride and good morale themselves, their colleagues, their
of employees.
companies, and their communities.

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 “To Educate The Mind Without The Morals Is

23 To Educate A Menace To Society.”

Theodore Roosevelt

Thank you