Crane and Matten

Business Ethics (3rd Edition)

Chapter 3

Evaluating Business Ethics:

Normative Ethical Theories
Lecture 3

Overview
Locate the role of ethical theory
Highlight international differences in
perspectives
Provide critical overview of traditional ethical
theories
Explore contemporary ethical theories

What are normative ethical theories?

Ethical theories are the rules and principles
that determine right and wrong for any given
situation
Crane and Matten (2010)
Normative ethical theories are those that
propose to prescribe the morally correct way of
acting
As opposed to descriptive ethical theories
which seek to describe how ethics decisions are
actually made in business

The role of ethical theory

The role of ethical theory

Two extreme positions (De George 1999)
Ethical absolutism claims there are eternal,
universally applicable moral principles
Right and wrong are objective qualities, can be
rationally determined
Typically traditional ethical theories

Ethical relativism claims morality is contextdependent and subjective

No universal right and wrongs that can be rationally
determined; depends on person making the decision
& culture in which they are located
Typically contemporary ethical theories

Normative ethical theories

North American and European

origins and differences
Differences between Anglo-American and
European approaches based on philosophical
arguments
Individual versus institutional morality

US tend to individualistic perspective

Europe towards wider economic and governing institutions

Questioning versus accepting capitalism

US tend to accept the capitalist framework

Europe tend to question the ethical justification of capitalism

Justifying versus applying moral norms

US tend to focus on application of morality

Europe focus on justification and ethical legitimation of norms

In contrast, Asian perspectives tend to be

based on religion (e.g. Islam, Buddhism)

Western modernist ethical theories

Traditional ethical theories

Generally offer a certain rule or principle
which one can apply to any given situation
These theories generally can be differentiated
into two groups
Motivation
/
Principles

Action

Outcomes

Non-consequentialist Ethics
Consequentialist Ethics
Source: Crane and Matten (2010)

Major normative theories

Egoism

Utilitarianism

Ethics of duties

Rights & justice

Contributors

Adam Smith

Jeremy Bentham
John Stuart Mill

Immanuel Kant

John Locke
John Rawls

Focus

Individual desires or
interests

Collective welfare

Duties

Rights

Rules

Maximization of
desires/self interest

Act/rule utilitarianism

Categorical
imperative

Respect for human

beings

Concept of
human
beings

Man as an actor with

limited knowledge
and objectives

Man is controlled by
avoidance of pain and
gain of pleasure
(hedonist)

Man is a rational
moral actor

Man is a being that is

distinguished by
dignity

Type

Consequentialist

Consequentialist

Non-consequentialist

Non-consequentialist

Source: Crane and Matten (2010)

Egoism
Theory of egoism - an action is morally right
if the decision-maker freely decides an action
to pursue either their (short-term) desires or
their (long-term) interests.
Adam Smith (1793): pursuit of individual interest
morally acceptable as invisible hand of market
creates benefit for all
Relies on free competition and good information
Enlightened egoism
However, markets do not function perfectly
Anti-globalisation movement
Sustainability debate

Utilitarianism
According to utilitarianism, an action is
morally right if it results in the greatest
amount of good for the greatest number of
people affected by the action
Also called the greatest happiness principle
Based on cost-benefit analysis

Problems with Utilitarianism

Subjectivity
This has led to refinement of theory
Act utilitarianism
Rule utilitarianism

Issues around quantification and distribution

of utility

Act- and Rule-Utilitarianism

Act utilitarianism
Looks to single actions and bases the moral
judgement on the amount of pleasure and the
amount of pain this single action causes.

Rule utilitarianism
looks at classes of action and ask whether the
underlying principles of an action produce more
pleasure than pain for society in the long run.

Ethics of duties
Categorical Imperative (Kant)
Maxim 1: Consistency
Act only according to that maxim by which you can at the same
time will that it should become a universal law.

Maxim 2: Human Dignity

Act so that you treat humanity, whether in your own person or in
that of another, always as an end and never as a means only.

Maxim 3: Universality
Act only so that the will through its maxims could regard itself at the
same time as universally lawgiving (would others agree? Would
you be happy to see your decision reported in the press?)

Problems with ethics of duties

Undervaluing outcomes
Complexity
Misplaced optimism?

Ethics of rights and justice

Natural rights
Certain basic, important, unalienable entitlements
that should be respected and protected in every
single action.
Based on consensus about nature of human dignity
Strongly based in western view of morality

Justice
The simultaneously fair treatment of individuals in a
given situation with the result that everybody gets
what they deserve
Fair procedures (procedural justice)
Fair outcomes (distributive justice)

John Rawlss
Theory of Justice
1. Each person is to have an equal right to the
most extensive total system of basic
liberties compatible with a similar system of
liberty for all.
2. Social and economic inequalities are to be
arranged so that they are both:
a. to the greatest benefit of the least advantaged;
b. attached to offices and positions open to all under
conditions of fair equality of opportunity.

Limits of traditional theories

Too abstract
Too reductionist
Too objective and elitist
Too impersonal
Too rational and codified
Too imperialist

Alternative perspectives on ethical

theory

Approaches based on character and

integrity
Virtue ethics
Contends that morally correct actions are those
undertaken by actors with virtuous characters.
Therefore, the formation of a virtuous character is the
first step towards morally correct behaviour

Acquired traits
Intellectual virtues
Moral virtues

Approaches based on ethics and

responsibility
Feminist ethics
An approach that prioritizes empathy, harmonious
and healthy social relationships, care for one another,
and avoidance of harm above abstract principles

Key elements
Relationships
Decisions taken in context of personal human interrelations

Responsibility
Active taking of responsibility, rather than merely having it

Experience
Learn and develop from experience

Approaches based on procedures of

norm generation
Discourse ethics
Aims to solve ethical conflicts by providing a process of
norm generation through rational reflection on the reallife experiences of all relevant participants

Key elements
Ultimate goal of ethical issues in business should be
the peaceful settlement of conflicts
Different parties in a conflict should sit together and
engage in a discourse about the settlement of the
conflict, and ultimately provide a situation that is
acceptable to all
ideal discourse criteria

Approaches based on empathy and

moral impulse
Postmodern ethics
An approach that locates morality beyond the sphere
of rationality in an emotional moral impulse towards
others. It encourages individual actors to question
everyday practices and rules, and to listen to and
follow their emotions, inner convictions and gut
feelings about what they think is right and wrong in a
particular incident of decision-making.

Postmodern business ethics

Postmodern business ethics emphasises
(Gustafson, 2000:21)

Holistic approach
Examples rather than principles
Think local, act local
Preliminary character

Summary
Towards a pragmatic use of ethical
theory

Typical Perspective

Ethical
Dilemma

Single normative consideration

for solving the ethical dilemma
Lens of ethical theory

Pluralistic Perspective

Pluralism?
Crane and Matten (2010) argue that for the
practical purpose of making effective decisions in
business:
Not suggest one theory or one approach as the best or
true view of a moral dilemma
Suggest that all these theoretical approaches throw light
from different angles on one and same problem
Complementary rather than mutually exclusive

Advocate position of pluralism

Middle ground between absolutism and relativism

Considerations in making ethical decisions: summary of key

insights from ethical theories
Consideration

Ones own interests

Typical question you might ask yourself

Theory

Is this really in my, or my organizations, best long-term interests? Would it be

Egoism
acceptable and expected for me to think only of the consequences to myself in this
situation?
Social consequences If I consider all of the possible consequences of my actions, for everyone that is Utilitarianism
affected, will we be better or worse off overall? How likely are these
consequences and how significant are they?
Duties to others
Who do I have obligations to in this situation? What would happen if everybody Ethics of duty
acted in the same way as me? Am I treating people only to get what I want for
myself (or my organization) or am I thinking also of what they might want too?
Entitlements of
Whose rights do I need to consider here? Am I respecting fundamental human
Ethics of rights
others
rights and peoples need for dignity?
Fairness
Am I treating everyone fairly here? Have processes been set up to allow everyone Theories of justice
an equal chance? Are there major disparities between the winners and losers
that could be avoided?
Moral character
Am I acting with integrity here? What would a decent, honest person do in the
Virtue ethics
same situation?
Care for others and
How do (or would) the other affected parties feel in this situation? Can I avoid
Feminist ethics
relationships
doing harm to others? Which solution is most likely to preserve healthy and
harmonious relationships among those involved?
Process of resolving What norms can we work out together to provide a mutually acceptable solution Discourse ethics
conflicts
to this problem? How can we achieve a peaceful settlement of this conflict that
avoids railroading by the most powerful player?
Moral impulse and
Am I just simply going along with the usual practice here, or slavishly following Postmodern ethics
emotions
the organizations code, without questioning whether it really feels right to me?
How can I get closer to those likely to be affected by my decision?What do my
emotions or gut feelings tell me once Im out of the office?