1. Introduction to Ethics
MBA 685
Chapter #2
Introduction to Ethics

2. Chapter #2 Overview Introduction to business ethics
Overview of ethical theories
Thinking ethically for business decision making
The PLUS model
Combining ethical theories
Code of Ethics

3. Nature and Significance of Ethics in Business Decision-Making
Ethics: Rational examination of moral beliefs and behavior; the study of morality.
Morality: Standards, conduct, and systems that provide guidance on how to act.
Law: Society’s standards and values that are enforceable in court

4. Is business ethics an oxymoron?
Former Supreme Court Justice Potter Stewart, “Ethics is knowing the difference between what you have a right to do and what is the right thing to do.”
Is business ethics an oxymoron?

5. Overview of Ethical Theories
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory

6. Relativism versus Objectivism: Where “The Good” Exists
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory
Relativism
“The Good” is inside
Objectivism
“The Good” is outside

7. The Workable Ethical Theories: Rational Theories
Not a Workable Theory
According to the Author
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory
Workable Theories

8. 1. Subjective relativism
Case for
Well-meaning and intelligent people disagree on moral issues
Ethical debates are disagreeable and pointless
Case against
Blurs distinction between doing what you think is right and doing what you want to do
Makes no moral distinction between the actions of different people
SR and tolerance are two different things
Decisions may not be based on reason
Not a workable ethical theory (according to author)
Relativism
No universal norms of right and wrong
One person can say “X is right,” another can say “X is wrong,” and both can be right
Subjective relativism
Each person decides right and wrong for himself or herself
“What’s right for you may not be right for me”

9. 2. Cultural relativism Case for Case against
Different social contexts demand different moral guidelines
It is arrogant for one society to judge another
Morality is reflected in actual behavior
Case against
Because two societies do have different moral views doesn’t mean they ought to have different views
Doesn’t explain how moral guidelines are determined
Doesn’t explain how guidelines evolve
Provides no way out for cultures in conflict
Because many practices are acceptable does not mean any cultural practice is acceptable (many/any fallacy)
Societies do, in fact, share certain core values
Only indirectly based on reason
Not a workable ethical theory
What is “right” and “wrong” depends upon a society’s actual moral guidelines
These guidelines vary from place to place and from time to time
A particular action may be right in one society at one time and wrong in other society or at another time

11. 3. Divine command theory (the virtue approach)
Good actions: those aligned with God’s will
Bad actions: those contrary to God’s will
Holy books reveal God’s will.
We should use holy books as moral decision-making guides.
Case for
We owe obedience to our Creator.
God is all-good and all-knowing.
God is the ultimate authority.
Case against
Different holy books disagree
Society is multicultural, secular
Some moral problems not addressed in scripture
“The good” ≠ “God” (equivalence fallacy)
Based on obedience, not reason

12. 4. Kantianism (the rights approach)
Good will: the desire to do the right thing
Immanuel Kant: Only thing in the world good without qualification is good will.
Reason should cultivate desire to do right thing.
Case for
Rational
Produces universal moral guidelines
Treats all persons as moral equals
Workable ethical theory
Case against
Sometimes no rule adequately characterizes an action.
There is no way to resolve a conflict between rules.
Kantianism allows no exceptions to moral laws.

13. Consumer Bill of Rights

14. Negative Versus Positive Rights
Negative right (liberty right): A right that another can guarantee by leaving you alone
Positive right (claim right): A right obligating others to do something on your behalf

15. Discussion Questions
In the following (true) scenarios on the next two slides, tell whether the people are interpreting the right being claimed as a negative right or as a positive right. Explain your choice.
In each scenario, which kind of right should it be and why?

16. Scenario A:
A man sued his health insurance company because it would not pay for Viagra. He argued that the insurer’s refusal to pay denied his right to a happy sex life.

17. Scenario B:
Two legislators who lost reelection votes sued an organization that ran ads criticizing their right to hold office.

18. 5. Act Utilitarianism
Jeremy Bentham and John Stuart Mill, 19th century
The best ethical course of action is the one that brings the greatest good for the greatest number
An action is good if it benefits someone
An action is bad if it harms someone
Utility: tendency of an object to produce happiness or prevent unhappiness for an individual or a community
Happiness = advantage = benefit = good = pleasure
Unhappiness = disadvantage = cost = evil = pain
Principle of Utility (The Greatest Happiness Principle)
An action is right (or wrong) to the extent that it increases (or decreases) the total happiness of the affected parties.

19. Act utilitarianism - Continued
Act utilitarianism applies Principle of Utility to individual actions
Act utilitarianism
Add up change in happiness of all affected beings
Sum > 0, action is good
Sum < 0, action is bad
Case for
Focuses on happiness
Down-to-earth (practical)
Comprehensive
Workable ethical theory
Case against
Unclear whom to include in calculations
Too much work
Ignores our innate sense of duty
Susceptible to the problem of moral luck

20. 6. Rule utilitarianism
We ought to adopt moral rules which, if followed by everyone, will lead to the greatest increase in total happiness
Rule utilitarianism applies Principle of Utility to moral rules
Case for
Compared to act utilitarianism, it is easier to perform the utilitarian calculus.
Not every moral decision requires performing utilitarian calculus.
Moral rules survive exceptional situations
Avoids the problem of moral luck
Workable ethical theory
Case against
All consequences must be measured on a single scale.
Utilitarianism ignores the problem of an unjust distribution of good consequences.
Utilitarianism does not always mean “the greatest good of the greatest number”
That requires a principle of justice
What happens when a conflict arises between the Principle of Utility and a principle of justice?

21. 7. Social contract theory (The Common Good Approach)
Thomas Hobbes
“State of nature”
We implicitly accept a social contract
Establishment of moral rules to govern relations among citizens
Government capable of enforcing these rules
Jean-Jacques Rousseau
In ideal society, no one above rules
That prevents society from enacting bad rules
Case for
Framed in language of rights
Explains why people act in self-interest without common agreement
Provides clear analysis of certain citizen/government problems
Workable ethical theory
Case against
No one signed contract
Some actions have multiple characterizations
Conflicting rights problem
May unjustly treat people who cannot uphold contract

22. Thinking Ethically for Business Decision Making
How exactly should we think through an ethical issue?
What questions should we ask?
What factors should we consider?
The first step is obvious but not always easy:
GET THE FACTS!
Primary/Direct Stakeholders
Secondary/Indirect Stakeholders

23. Basic Business Decision Making Model
Step 1: Define the problem
Step 2: Identify alternatives
Step 3: Evaluate the alternatives
Step 4: Make the decision
Step 5: Implement the decision
Step 6: Evaluate the decision

24. Example of an Ethical Filter: The PLUS Model
P = Policies Is it consistent with my organization's policies, procedures and guidelines?
L= Legal Is it acceptable under the applicable laws and regulations?
U = Universal Does it conform to the universal principles/values my organization has adopted?
S= Self Does it satisfy my personal definition of right, good and fair?

25. Six Steps to Ethical Decision Making Using the PLUS Model
Step 1: Define the problem PLUS
Step 2: Identify alternatives
Step 3: Evaluate the alternatives PLUS
Step 4: Make the decision
Step 5: Implement the decision
Step 6: Evaluate the decision PLUS
Ethical
Filters

26. Using Multiple Theories for Ethical Problem Solving
What moral rights do the affected parties have, and which course of action best respects those rights?
What benefits and what harms will each course of action produce, and which alternative will lead to the best overall consequence?
Which course of action treats everyone the same, except where there is a morally justifiable reason not to, and does not show favoritism or discrimination?
Which course of action advances the common good?
Which course of action develops moral virtues?
Other Approaches
The Legality Test
The Golden Rule Test
The Light of Day Test

27. Codes of Ethics (Ethics Codes, Ethics Policies, Core Values, Integrity Policies, etc.)
Formal statement of ethical principles and rules of conduct
United Technologies –
JMU CoB Faculty Integrity Policy -
JMU Finance Code of Ethics -
Advice from the Ethics Office of Texas Instruments -

28. Copyright  All Rights Reserved
Copyright  2008 by Theresa B. Flaherty, Ph.D. No part of these materials may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without the express written consent of Dr. Theresa B. Flaherty.