Various approaches to Business Ethics - Theories of Ethics- Friedman’s Economic theory, Kant’s Deontological theory, Mill & Bentham’s Utilitarianism theory.

1. VARIOUS
APPROACHES
TO BUSINESS
ETHICS
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2. Different Approaches
towards Ethical
Behaviour in
Business:
• There are different ways of thinking
about ethical behaviour.
• Some situations offer clean-cut
ethical choices. Stealing is unethical.
• There is no debate about it.
• There are other situations where two
or more values, rights, or obligations
conflict with each other and a choice
has to be made.
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3. Teleological approach:
Also known as
consequentiality approach,
it determines the moral
conduct on the basis of the
consequences of an
activity.
Whether an action is right
or wrong would depend
upon the judgement about
the consequences of such
an action.
The idea is to judge the
action moral if it delivers
better than harm to
society.
For example, with this
approach, lying to save
one’s life would be
ethically acceptable.
Some of the philosophers
supporting this view are
nineteenth century
philosophers John Stuart
Mill and Jeremy Bentham.
They proposed that ethics
and morality of an act
should be judged on the
basis of their ultimate
utility.
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4. • For example, not paying the
money to someone whom you
owe may make you happy, but it
disrupts the social system of
fairness and equity thus making
the society unhappy.
• Accordingly, this would not be
considered as a Similarly, a party
who breaks a contract may be
happy because it is beneficial to
it, but it would damage the
society’s legal framework for
conducting business in an
orderly fashion.
• Hence, it would not be an ethical
act.
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5. Deontological approach
• While a “teleologist” focuses on doing what will maximize societal welfare, a “deontologist”
focuses on doing what is “right” based on his moral principles.
• Accordingly, some actions would be considered wrong even if the consequences of these
actions were good.
• According to DeGeorge:
“The deontological approach is built upon the premise that “duty” is the basic moral category and
that the duty is independent of the consequences. An action is right if it has certain characteristics
or is of a certain kind and wrong if it has other characteristics or is of another kind”.
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6. This approach has more of a
religious undertone.
The ethical code of conduct has
been dictated by the Holy
Scriptures.
The wrongs and rights have been
defined by the word of God.
This gives the concept of ethics a
fixed perception. Since the word
of God is considered as
permanent and unchangeable, so
then is the concept of ethics.
Holy Scriptures like those of the
Bible, the Holy Quran, Bhagwad
Gita and Guru Granth Sahib are
considered to be the words of
God and hence must be accepted
in their entirety and without
question.
In similar thinking, though based
upon rationality, rather than
religious command, Emmanuel
Kant, an eighteenth-century
German philosopher suggested
morality as universally binding on
all rational minds.
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7. According to him, “Act as if the maxim of thy action were to become by thy will a
universal law of nature.” This mode of thinking asks whether the rationale for your
action is suitable to become a universal law or principle for everyone to follow.
For example, “not breaking a promise” would be a good principle for everyone to
follow. This means that morality would be considered unconditional and
applicable to all people at all times and in all cases.
This approach suggests that moral judgments be made on the determination of
intrinsic good or evil in an act which should be self-evident.
For example, the Ten Commandments would be considered as one of the
guidelines to determine what is intrinsically good and what is intrinsically evil.
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8. The challenges to this perspective, however, include
1) conflicts that arise when there is not an agreement about the
principles involved in the decision;
2) the implications of making a “right” choice that has bad
consequences; and
3) what decisions should be made when duties conflict. These
challenges are definitely ones that should be considered when
relying on this as an ethical system.
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9. Utilitarianism
Utilitarianism, in normative ethics, a tradition stemming from the late 18th- and
19th-century English philosophers and economists Jeremy Bentham and John
Stuart Mill according to which an action (or type of action) is right if it tends to
promote happiness or pleasure and wrong if it tends to produce unhappiness or
pain—not just for the performer of the action but also for everyone else affected
by it.
Utilitarianism is a species of consequentialism, the general doctrine in ethics that
actions (or types of action) should be evaluated on the basis of their
consequences.
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10. Utilitarianism and other consequentialist theories are in opposition to egoism,
the view that each person should pursue his or her own self-interest, even at the
expense of others, and to any ethical theory that regards some actions (or types
of action) as right or wrong independently of their consequences
(see deontological ethics).
Utilitarianism also differs from ethical theories that make the rightness or
wrongness of an action dependent upon the motive of the agent—for,
according to the utilitarian, it is possible for the right thing to be done from a
bad motive.
Utilitarians may, however, distinguish the aptness of praising or blaming an
agent from whether the action was right.
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11. There are three main concerns
that seem to arise when public
relations professionals rely on
utilitarian ethics to make decisions.
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12. FIRST, RATHER THAN LOOKING AT THE CHOICE OR ACTION ITSELF,
DECISION-MAKERS ARE FORCED TO GUESS THE POTENTIAL OUTCOMES
OF THEIR CHOICE IN ORDER TO DETERMINE WHAT IS ETHICAL.
GRUNIG BELIEVES THIS IS A FAULTY LINE OF REASONING WHEN HE
SUGGESTED THAT: “WE BELIEVE, IN CONTRAST, THE PUBLIC RELATIONS
SHOULD BE BASED ON A WORLDVIEW THAT INCORPORATES ETHICS
INTO THE PROCESS OF PUBLIC RELATIONS RATHER THAN ON A VIEW
THAT DEBATES THE ETHICS OF ITS OUTCOMES.
” IN OTHER WORDS, ETHICS SHOULD BE ABOUT THE DECISION-
MAKING PROCESS, NOT JUST THE OUTCOME, WHICH CAN’T BE
GUARANTEED.
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13. Second, utilitarian ethics also “presents questions of conflict
with regard to which segment of society should be considered
most important” in weighing the “good” or outcome.
In other words, if a solution drastically harms a minority group,
would it be ethical if the majority benefited from that decision?
This seems to contradict the goal of public relations to build
mutually beneficial relationships, regardless of the number of
people in a particular stakeholder group.
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14. • The third objection is that it is not always
possible to predict the outcome of an action.
• Bowen points out that “consequences are too
unpredictable to be an accurate measure of
the ethics of a situations.”
• In other words, consequences of actions can
be highly volatile or impossible, even, to
predict. Using outcomes as a measurement of
ethics will not, therefore, provide an accurate
way for professionals to measure whether
decisions are ethical.
• Professionals must be able to evaluate
decisions and choices with concrete ethical
guidelines instead of hoping that certain
outcomes will result in them having made an
ethical choice.
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15. Friedman Doctrine
• Friedman Doctrine or the Shareholder Theory relates to business ethics. As per
this theory, the objective of a company should be to maximize the returns for
the shareholders.
• The only business of the business is to do business and make money.
• Milton Friedman, an American economist, came up with this theory in 1970.
• The theory, which appeared in the New York Times in 1970, suggests that a
company does not have any social responsibility towards society. Instead, their
most significant commitment is towards their shareholders.
•
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16. Friedman argues that executives are merely employees of the
owners. Hence, they must provide quality service to the owners first.
Moreover, shareholders are the owners of a company, and they
should work to satisfy their shareholders.
Friedman Doctrine also notes that shareholders must make key
business decisions.
Or an outsider must not make decisions that can affect the
shareholders.
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17. • As per the Shareholder Theory, a company has no social responsibility unless
the shareholders decide so. The theory states that the authority to determine
social responsibility should rest with the shareholders, not the managers or
executives.
• Also, it is the shareholders who must decide on the use of the company’s
resources for social purposes. Social responsibility, such as offering social
amenities, is usually capital-intensive. Thus, they impact the financial resources
of a firm. Hence, it is the shareholders who get to decide the use of financial
resources.
• According to Friedman, it must not be made mandatory for a company to take
up social responsibilities. Instead, the final decision should rest with the
shareholders.
•
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18. Influence
of
Friedman
Doctrine
Whenever there is a question like what are companies
for, Friedman Doctrine is the first answer. Also, every
business school book states that the goal of a company
is to maximize shareholder value.
Since its introduction, several companies have been
following the Shareholder Theory.
Most businesses currently work to maximize the
shareholder value, rather than focus on CSR (corporate
social responsibility).
Such companies have a goal to increase profits
because this is what matters most to the shareholders.
Also, when allocating resources, the executives of such
firms give preference to maximize shareholder value.
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19. Criticism
The critics argue that this
theory gives importance to
the shareholders and neglects
the society.
They believe that along with
the shareholders, a company
also needs a community to be
successful. It is because a
company eventually sells its
products to the community.
Moreover, the goodwill that a
company creates in the
community helps it to be
successful. Thus, an entity has
a responsibility towards
society as well.
Moreover, the Friedman
Doctrine has also received
criticism for enriching a few
corporate at the expense of
the community.
Even Paine and Bower, who
support this theory, believe
the doctrine comes with a few
negative side-effects.
These include pressure from
shareholder activists and
management burnout to
increase the profits for the
shareholders.
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20. EMERGENCE
OF NEW
VALUES IN
INDIAN
INDUSTRIES
POST 1991
• PROFESSIONALISM
• SYSTEMATIC PERSONNEL POLICIES
• ETHICS IN FUNCTIONAL AREAS
• REWARDS & RECOGNITION
• CUSTOMER FOCUS
• DEFECT FREE APPROACH
• SYNERGY
• BPR
• SYSTEM APPROACH
• CORPORATE GOVERNANCE
• BETTER FACILITIES TO EMPLOYEES
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21. REFERENCES
• https://pagecentertraining.psu.edu/public-
relations-ethics/introduction-to-public-
relations-ethics/lesson-1/ethical-theories/
• https://www.yourarticlelibrary.com/business
-management/5-different-approaches-
towards-ethical-behaviour-in-business/3443
• https://www.britannica.com/topic/utilitarian
ism-philosophy/Effects-of-utilitarianism-in-
other-fields
• https://efinancemanagement.com/financial-
management/friedman-doctrine
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