This document discusses several approaches to ethical evaluation in business, including utilitarianism and rights-based approaches. It provides examples and definitions of key concepts. The central questions posed are how to determine the morally right action, how to weigh costs and benefits, and how rights and justice relate to utilitarian analysis. It also discusses contractual rights and duties as they apply to business ethics.

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CHAPTER 2
ETHICAL
PRINCIPLES
IN BUSINESS

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Chapter 2: Learning out comes
• What is the central question posed in the utilitarian
approach to moral evaluation?
• How can the concept of a “right’’ be applied to
business situations?
• What is “justice”?
• What is the key concept underlying an “ethic of
care”?
• Is it possible to integrate the various approaches to
moral evaluation?
• What role does character play in morality?
• What are the special challenges of applying
business ethics in an international context?

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Utilitarianism: Weighing Social
Costs and Benefits
Example: Ford and its infamous pinto
• Ford knew that the pinto would explode when the
rear ended at only 20mph, but they also knew that it
would cost $137 million to fix the problem. Since
they would only have to pay $49 million in damages
to the injured victims and families of those who died,
they calculated that it was not right to spend money
to fix the cars when the society set such a low price
on the lives and health of the victims. The kind of
analysis that Ford used in their cost-benefit analysis
is a version of what has been traditionally called
utilitarianism.

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Utilitarianism: Weighing Social
Costs and Benefits
• Utilitarianism (consequentialism) 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.
• In any situation, the “right” action or policy is the
one that will produce the greatest net benefits or the
lowest net costs.
• The benefits of an action may include any desirable
goods (pleasures, health, lives, satisfactions,
knowledge, happiness) produced by the action, and
costs may include any of its undesirable evils (pain,
sickness, death, dissatisfaction, ignorance,
unhappiness).

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How does one determine the moral thing
to do on any particular occasion?
There are three considerations to follow:
1.You must determine what alternative
actions are available.
2.You must estimate the direct and
indirect costs and benefits the action
would produce for all involved in the
foreseeable future.
3.You must choose the alternative that
produces the greatest sum of utility.

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• However, traditional utilitarians would deny
that an action of a certain kind is always
either right or wrong.
• Instead, each action would have to be
weighed given its particular circumstances.

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• Measurement Problems
1. Comparative measures of the values things
have for different people cannot be made,
2. Some benefits and costs are impossible to
measure. How much is human life worth for
example?

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3. The potential benefits and costs of an action
cannot always be reliably predicted, they
also cannot be adequately measured.
4. It is unclear exactly what counts as benefits
or cost. People see these things in different
ways.
5. Utilitarian measurement implies that all
goods can be traded for equivalents of each
other. However not everything has monetary
equivalent. Critics have argued that there
are some none-economic goods – such as
life, love, freedom, equality, health, beauty,
whose value is such that no quantity of any
economic good is equal in value to the value
of the none-economic good.

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Two widely used common-sense criteria
(a) Distinction between Instrumental goods and
intrinsic goods
• Instrumental goods: are things that are considered
valuable only because they lead to other good things
(e.g., a radio is instrumentally good in order to hear
music).
• Intrinsic goods: Intrinsic are things that are desired
for their own sake (is worth for itself, not as a means
to something else) such as health and life. These
goods always take precedence over instrumental
goods, which are things that are good because they
help to bring about an intrinsic good.

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(b) Distinction between needs and wants
• Goods that bring about needs are more
important than those that bring about
wants.
• NOTE: These commonsense methods
of weighing goods are only intended to
aid us in situations where quantitative
methods fail.

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Problems with Rights and Justice
• The major difficulty with utilitarianism is that
it is unable to deal with two kinds of moral
issues: those relating to RIGHTS and those
relating to JUSTICE. That is, the utilitarian
principle implies that certain actions are
morally right when in fact they are unjust or
violate people’s rights.
• Rights: look at individual entitlements to
freedom of choice and well-being
• Justice: looks at how benefits and burdens
are distributed among people

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Utilitarian Replies to Objections on
Rights and Justice
• In response to the critics on rights and justice,
utilitarians have devised or proposed an important
and influential alternative version of utilitarianism
called rule-utilitarianism.
• Rule-Utilitarianism
• According to the rule-utilitarian, when trying to
determine whether a particular action is ethical, one
is never supposed to ask whether that particular
action will produce the greatest amount of utility.
Instead, one is supposed to ask whether the action
is required by the correct moral rules that everyone
should follow.

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• If the action is required by such rules,
then one should carry out the action.

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• Example: Imagine the following scenario
• A prominent and much-loved leader has been rushed to the
hospital, grievously wounded by an assassin’s bullet. He
needs a heart and lung transplant immediately to survive. No
suitable donors are available, but there is a homeless person in
the emergency room who is being kept alive on a respirator,
who probably has only a few days to live, and who is a perfect
donor. Without the transplant, the leader will die; the homeless
person will die in a few days anyway. Security at the hospital
is very well controlled. The transplant team could hasten the
death of the homeless person and carry out the transplant
without the public ever knowing that they killed the homeless
person for his organs. What should they do?
– For rule utilitarians, this is an easy choice. No one could
approve a general rule that lets hospitals kill patients for
their organs when they are going to die anyway. The
consequences of adopting such a general rule would be
highly negative and would certainly undermine public trust
in the medical establishment.

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Quick Review
Evaluating Utilitarianism
• Critics say not all values can be measured
• Utilitarians respond that monetary and
commonsense measures can measure
everything
• Critics say utilitarianism fails with rights and
justice
• Utilitarians respond that rule-utilitarianism
can deal with rights and justice.

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Rights and Duties
• In general, a right is an individual’s entitlement to
something. A person has a right when that person
is entitled to act in a certain way or is entitled to
have others act in a certain way toward him or her.
• The entitlement may derive from a legal system
that permits or empowers the person to act in a
specified way or that requires others to act in
certain ways toward that person. The entitlement
is then called a legal right.
• Legal rights are limited, to the particular
jurisdiction within which the legal system is in
force.

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• Entitlements can also derive from a
system of moral standards
independently of any particular legal
system. Such rights are called moral
rights or human rights and they 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.
• Unlike legal rights, moral rights are not
limited to a particular jurisdiction.

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Three important features defining moral rights
1. Moral rights are closely related to duties
2. Moral rights provide individuals with
autonomy and equality in the free pursuit of
their interests.
3. Moral rights provide a basis for justifying
one’s actions and for invoking the protection
or aid of others.
• Moral judgements made on the basis of
rights differ substantially from those based
on utility

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Moral rights vs. utilitarianism
• Moral rights express the requirements of
morality from the point of view of the
individual, whereas utilitarianism expresses
the requirements of morality from the point
of view of society as a whole.
• Rights limit the validity of appeals to social
benefits and to numbers.
• On the other hand although rights generally
override utilitarian standards, they do not
always do so. In times of war for example,
civil rights are commonly restricted for the
public good.

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Negative and Positive Rights
• Negative rights: Duties others have to
not interfere in certain activities of the
person who hold a given right. For e.g
right to privacy.
• Positive rights: Duties of other agents
(it is not always clear who) to provide
the holder of the right with whatever he
or she needs to freely pursue his or
interest. For e.g right to education,
right to medical care.

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Contractual Rights and Duties
• Contractual rights and duties (sometimes called
special rights and duties or special obligations)
are the limited and correlative duties that arise
when one person enters an agreement with
another person. This rights are closely connected
to business.
• These rights attach only to specific individuals,
and the duties they give rise to attach only to
specific individuals.
• In addition, they arise out of specific transactions
between parties and depend upon a publicly
accepted system of rules.
• Without the institution of contract, modern
businesses could not exist.

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Four ethical rules governing contracts
• Both parties to a contract must have full
knowledge of the nature of the agreement.
• Neither party must intentionally misrepresent
the facts.
• Neither party must be forced to enter a
contract.
• The contract must not bind the parties to an
immoral act.
• NOTE: Generally, a contract that violates
one or more of these conditions is
considered void.

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A basis for Moral Rights: Kant
• A more satisfactory foundation for moral rights is
provided by the ethical theory developed by
Immanuel Kant.
• Kant in fact attempts to show that there are certain
moral rights and duties that all human beings
possess regardless of any utilitarian benefits that
the exercise of those rights and duties may provide
for others.
• His principle known as categorical imperative
requires that everyone be treated as a free and equal
person.
• Kant provides at least two ways of formulating this
basic moral principle, each formulation serves as an
explanation of the meaning of this basic moral right
and correlative duty.

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The first formulation of Kant’s categorical imperative
• It states: “ I ought never to act except in a such a
way that I can also will that my maxim should
become a universal law".
• According to Kant a maxim is the reason a person
has for doing what he plans to do.
• Therefore, an action is morally right if the person’s
reason for doing it is a reason he would be willing to
have every person in a similar situation act upon.
For Kant
• “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 a
similar situation”.

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• Categorical imperative incorporates two
criteria for determining moral right and
wrong: universalizability and reversibility.
• Universalizability: The person’s reasons for
acting must be the reasons that everyone
could act on at least in principle.
• Reversibility: The 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.

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The second formulation of Kant’s categorical
Imperative
• “ act in such a way that you simply 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”.

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This version of the categorical imperative
implies that human beings have an equal
dignity that sets them apart from things such
as tools or machines and that is
incompatible with their being manipulated,
deceived, or otherwise unwillingly exploited
to satisfy the self-interests of another.

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Quick Review
Kant’s Categorical Imperative Formulas
1. Never do something unless you are willing to
have everyone do it.
2. Never use people merely as means, but
always respect and develop their ability to
choose for themselves.
Kant’s principle advocate the following;
“Do unto others as you would have them do
unto you.”

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The libertarian objection: Nozick
• Some important views on rights that are
different from the ones we have sketched
have been proposed recently by several
libertarian philosophers, such as Robert
Nozick.
• They claim that freedom from constraint is
necessarily good and that all constraints on
one by others are necessarily evils, except
when they prevent even a greater human
constraints.
• If I have a right to unionize for example, I
constrain the rights of my employer to treat
me as he sees fit.

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Justice and Fairness
• Justice, like rights, is an important moral concept
with a wide range of applications.
• We use it to evaluate not only the actions of
individuals but also social, legal, political and
economic practices and institutions.
• Although the word “just” is sometimes used
interchangeably with “right” and “good,” it generally
has a more restricted meaning that is closer to
“fair”.
• Questions of justice often arise when there is
something to distribute. If there is a shortage of
organ donors, for example, we ask, what is a just,

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or fair, way of deciding who gets a
transplant? If there is a burden, such as
taxes, we want to make sure that everyone
bears a fair share.
• Justice is also concerned with the righting of
wrongs. It requires for example, that a
criminal be punished for a crime and that the
punishment fit the crime by being neither too
lenient nor too severe.
• To treat people justly is to give them what
they deserve.
• The concept of justice is relevant to business
ethics primarily in the distribution of benefits
and burdens.

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Types of justice
• Distributive justice: Concerned with the fair
distribution of society’s benefits and burdens.
• Retributive justice: refers to just the imposition
of punishments and penalties on those who do
wrong.
• Namibia’s Stock Theft Act which prescribe a
sentence of at least 20 years’ imprisonment without
the option of a fine for anyone convicted of stealing
livestock worth N$500 or more, when the conviction
is the offender’s second stock theft, then a sentence
of at least 30 years’ imprisonment without the option
of a fine which is prescribed for people convicted of
stock theft for a second or subsequent time is given.

33. • Compensatory justice: concerns the
just way of compensating people for
what they lost when they were wronged
by others.
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Distributive Justice
• The fundamental principle of distributive justice
may be expressed as follows:
“individuals who are similar in all respects
relevant to the kind of treatment in question
should be given similar benefits and burdens,
even if they are dissimilar in other relevant
respects and individuals who are dissimilar in a
relevant respect ought to be treated dissimilarly,
in proportion to their dissimilarity.”

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Principles of Distributive Justice
• Fundamental: distribute benefits and burdens
equally to equals and unequally to unequals
• Egalitarian: distribute equally to everyone
• Capitalist: distribute by contributions
• Socialist: distribute by need and ability
• Libertarian: distribute by free choices
• Rawls: distribute by equal liberty, equal
opportunity, and needs of disadvantaged

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• Some of the egalitarians have tried to strengthen
their position by distinguishing between two kinds of
equality; political equality and economic equality.
1. Political equality: refers to an equal participation in,
and treatment by, the means of controlling and
directing the political system. This includes rights to
participate in the legislative process, equal civil
liberties and equal rights to due process.
2. Economic equality: refers to the equality of income
and wealth and equality of opportunity. The
criticisms levelled against equality, according to
some egalitarians, their criticisms about equality
only apply to economic equality not political equality.

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• The main question that is raised by contributive
justice is how the value of contribution of each
should be measured, some say it should be
measures in terms of work effort, the harder one
works the more one deserves.
• This is the assumption behind the Puritan ethic,
which held that individuals had a religious
obligation to work hard at their calling (the career
to which God summons each individual) and that
God justly rewards hard work with wealth and
success, while He justly punishes laziness with
poverty and failure.
• A second part says that contribution should be
measured in terms of productivity, the better
quality of a person’s contributed product, the
more he or she should receive.

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Rawls’ theory of justice
 Each person is to have an equal right to the most extensive
total system of equal basic liberties compatible with a
similar system of liberty for all. ( The Principle of equal
Liberty)
1. Social and economic inequalities are to be arranged so that
they are both:
a) to the greatest benefit of the least advantaged,
consistent with the just savings principle, (the
difference principle) and
b) attached to offices and positions open to all under
conditions of fair equality of opportunity. (the principle
of equal opportunity)
• # Rawls tells us that Principle 1 is supposed to take priority
over Principle 2, should the two of them ever come into
conflict, and within Principle 2, Part b is supposed to take
priority over Part a.

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• Principle of equal liberty: it says that each
citizen’s liberties must be protected from
invasion by others and must be equal to those of
others. These basic liberties include the right to
vote, freedom of speech and conscience and the
other civil liberties, freedom to hold personal
property, and freedom from arbitrary arrest.
• Difference principle: It assumes that a
productive society will incorporate inequalities,
but it then asserts that steps must be taken to
improve the position of the most needy
members of society, such as the sick and the
disabled, unless such improvements would so
burden society that they make everyone,
including the needy, worse off than before.

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• Principle of fair equality of opportunity: It
says that everyone should be given an
equal opportunity to qualify for the more
privileged positions in society’s
institutions.
• Rawls theory incorporates with the
Kantian principles of reversibility and
universability, though some critics of
Rawls point out that just because a group
of people would be willing to live under a
principle it does not mean that it is morally
justified.
•

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Retributive justice and compensatory justice
• They both deal with how best to deal with
wrongdoers.
• Retributive justice concerns blaming or
punishing those who do wrong.
• Compensatory justice concerns restoring to
a harmed person what he lost when someone
else wronged him. A person should be
compensated if these three conditions
pertain:
1.The action that the inflicted injury was wrong
or negligent.
2.The action was the real cause of the injury
3.The person did the action voluntarily

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The Ethics of Care
• Ethic of care is an ethic that
emphasises that we have an obligation
to exercise special care toward the
people with whom we have valuable
close relationships.
• Compassion, concern, love, friendship,
and kindness are all sentiments or
virtues that normally manifest this
dimension of morality.

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Virtue Ethics
• According to virtue ethics, one should not only look
at the kind of actions an agent ought to perform, but
should pay attention to the kind of person an agent
ought to be.
• An “agent-based” focus on what one ought to be, in
contrast to an “action-based” focus on how one
ought to act, would look carefully at a person’s
moral character, including, in particular, whether a
person’s moral character exhibits virtue or vice.
• A more adequate approach to ethics, according to
these ethicists, would take the virtues (such as
honesty, courage, temperance, integrity,
compassion, self-control) and the vices (such as
dishonesty, ruthlessness, greed, lack of integrity,
cowardliness) as the basic starting point for ethical
reasoning.