1. 4 Business Ethics C H A P T E R
“It is not what a lawyer tells me I may do; but what humanity, reason, and justice, tell me I ought to do.”
Edmund Burke

2. Lecture One Topics Ethical Theories
Guidelines for Ethical Decision Making
Resisting Requests to Act Unethically
Leading Ethically

3. Ethical Theories Rights Theory Justice Theory Utilitarianism
Profit Maximization

4. Rights Theory
Kant’s Categorical Imperative: An action is ethical only if it can be applied universally
Golden Rule: Treat others as you would want to be treated
Strength: Strong protection for rights considered to be “fundamental”
Weaknesses:
Difficulty of agreeing on what rights are “fundamental”
Disregard for costs or benefits
Sense of entitlement discourages initiative and entrepreneurship

5. Justice Theory Rawls’ “Greatest Equal Liberty Principle”
Each person has an equal right to the same basic rights and liberties
Rawls’ “Difference Principle”
Social inequalities are acceptable only if they can’t be eliminated without making the worst-off even worse off
Nozick: Equality of opportunity, not outcome
Strength: Protection of the least advantaged
Weaknesses:
Disregard for costs or benefits
Difficulty of measuring and correcting inequalities

6. Utilitarianism Maximize social utility
An action is ethical if its benefits outweigh its costs to society as a whole
Utility can be defined broadly or narrowly
“Act” vs. “Rule” utilitarianism
Strengths:
Easy to articulate standard of conduct
Maximizes social utility
Weaknesses:
Difficult to measure utility
Unequal distribution of benefits and costs
Not constrained by law

7. Profit Maximization
Maximizing total social welfare by maximizing long-run profits (within the law) for the actor or his/her organization
Strengths:
Allocates society’s resources in the most productive and efficient way
Requires conduct constrained by law and marketplace
Weaknesses:
Inability to judge profit-maximizing acts
Disregard for social inequalities

8. Guidelines for Ethical Decision Making

9. Apply the Guidelines To a decision whether:
To lay off employees to cut costs or incur a significant decrease in profit
To use a less expensive component with a 15% increased risk of defects or use a more expensive component with less profit
To violate an environmental law and pay $25,000 in fines or spend $50,000 to comply with the law
To shred documents that your boss asks you to shred as part of a “routine document retention policy” but that you know are important to a criminal investigation

10. Resisting Requests to Act Unethically

11. Leading Ethically Be ethical
Communicate the firm’s core ethical values
Connect ethical behavior with the firm’s and workers’ best interests
Reinforce ethical behavior

12. Example: Introductory Problem
Barbara Toffler, “Final Accounting: Ambition, Greed and the Fall of Arthur Andersen”
How would the guidelines for ethical decision-making apply?
How would each ethical theory view this situation?
What steps might the consultant have used to resist the request to act unethically?

13. Multiple-Choice Examples
Raj is considering installing a windmill in his front yard to save energy. He is thinking about the effect that this action will have on his neighbors, and whether the energy saved will help reduce demand for gas and electricity. Raj's decisionmaking process illustrates:
Act Utilitarianism
Rule Utilitarianism
Rights Theory
Justice Theory

14. Ralph Nader’s Article
What ethical theories does Nader seem to be invoking?
How would you respond to Nader if you were:
A rights theorist?
A justice theorist?
A utilitarian?
A profit maximizer?