Normative Ethical Theories

Suyanto, PhD., CA
Faculty of Economics and Business
This session….
} Locate the role of ethical theory
} Highlight international differences in perspectives
} Explore contemporary ethical theories
} Provide critical overview of traditional ethical theories
The Role of Ethical Theory
} Two Extreme Positions (De George 1999)
Ethical absolutism claims Ethical relativism claims
there are eternal, morality is context
universally applicable moral dependent and subjective
principles
Right and wrong are objective No universal right and wrongs
qualities, can be rationally that can be rationally
determined determined; depends on person
making the decision & culture in
which they are located
Typically traditional ethical Typically contemporary ethical
theories theories
Think!
} Gift
} Hospitality

} CAN you make a consensus whether these actions are ethical

or not?
Arguments For and Against Bribery
For Against
} Wrong
} Necessary to do business
} Illegal
} Common practice } Compromise personal beliefs
} Accepted practice } Promotes government corruption
} Form of commission, tax, or compensation } Slippery slope
} Prohibits taking a stand for
honesty, etc.
} Benefits recipient only
} Creates dependence on
corruption
} Deceives stockholders
Ethical Theories
Ethical theories should help in determining “right” and “wrong”
for a certain situation, and in general for any circumstance,
through the use rules and principles.

} Normative ethical theories are those that prescribe a “correct”

way to act morally
} Descriptive ethical theories describe ethics that concern how
ethical decisions are taken

Source: Crane and Matten (2010)

Normative Theories

Motivation/
Action Outcomes
Principles

Consequence
Non-Consequence

Source: Crane and Matten (2010)

Normative Theories

Motivation/
Action Outcomes
Principles

Consequentialist Ethics
Non-Consequentialist Ethics
Normative Theories

Normative
Theories

• Stockholder Theory
Consequentialist
Non- • Stakeholder Theory
consequentialist • Social Contract Theory
Theories
Theories

Ethics of Duties Ethics of Rights

Egoism Utilitarianism
(Deontological) & Justice
 Major Normative Theories
Egoism Utilitarianism Ethics of duties Rights & justice

Contributors Adam Smith Jeremy Bentham Immanuel Kant John Locke

John Stuart Mill John Rawls
Focus Individual desires or Collective welfare Duties Rights
interests
Rules Maximization of Act/rule utilitarianism Categorical Respect for human
desires/ self interest imperative beings
Concept of Human Man as an actor with Man is controlled by Man is a rational Man is a being that is
Being limited knowledge avoidance of pain and moral actor distinguished by dignity
and objectives gain of pleasure
(“hedonist”)
Type Consequentialist Consequentialist Non-consequentialist Non-consequentialist

Source: Crane and Matten (2010)

Utilitarianism
• Actions and policies should be evaluated on the
basis of the benefits and costs they will impose on
society.
• The only morally right action in any situation is that
whose utility is greatest by comparison to the utility
of all the other alternatives .
• Leading utilitarian theorists:
– Jeremy Bentham
– John Stuart Mill
How to Apply Utilitarian Principles
• First, determine what alternative actions or policies are
available to me in that situation.
• Second, for each alternative action, estimate the direct and
indirect benefits and costs that the action will probably produce
for all persons affected.
• Third, for each action, subtract the costs from the
benefits to determine the net utility of each action.
• Fourth, the action that produces the greatest sum total of utility
must be chosen as the ethically appropriate course of action.

• Cost-benefit analysis
• “Greatest happiness principle”
The Greatest Happiness Principles
Criticisms of Utilitarianism -- 1
• Critics say not all values can be measured.
– Utilitarians respond that monetary or other commonsense measures
can measure everything.
• How to measure good/values?
• Quantitative utilitarianism ~ utility calculus
• Qualitative utilitarianism ~ values as qualities some better than others
• Which consequence?
• Actual vs potential consequences?
Criticisms of Utilitarianism -- 2
• Consequences of what?
• Act utilitarianism ~ Looks to single action and bases the moral judgement on the amount of
good and the amount of pain this single action causes.
• Rules utilitarianism ~ Looks at classes of action and ask whether the underlying principles of
an action produce more good than pain for society in the long run.
• Consequences for whom?
• Critics say utilitarianism fails with rights and justice.
– Utilitarians respond that rule-utilitarianism can deal with rights and
justice.
The Concept of a Right
• Right = an individual’s entitlement to something.
– Legal right = An entitlement that derives from a legal system that permits or empowers a
person to act in a specified way or that requires others to act in certain ways toward that
person.
– Moral (or human) rights = rights that all human beings everywhere possess to an equal
extent simply by virtue of being human beings.
• Legal rights confer entitlements only where the particular legal
system is in force.
• Moral rights confer entitlements to all persons regardless of their legal system.
Moral Rights
• Can be violated even when “no one is hurt”.
• Are correlated with duties others have toward the person with the
right.
• Provide individuals with autonomy and equality in the free pursuit of
their interests.
• Provide a basis for justifying one’s actions and for invoking the
protection or aid of others.
• Focus on securing the interests of the individual unlike utilitarian
standards which focus on securing the aggregate utility of
everyone in society.
Three Kinds of Moral Rights
• Negative rights require others leave us alone.
• right on ownership of personal business assets, right to
privacy
• Positive rights require others help us.
• right to work, right to education
• Contractual or special rights require others keep
their agreements.
• Individual ~ agreement between to two parties
• Organisation ~ duty to care (doctor, manager,
teacher)
Contractual Rights and Duties
• Created by specific agreements and conferred only on the
parties involved.
• Require publicly accepted rules on what constitutes
agreements and what obligations agreements impose.
• Underlie the special rights and duties imposed by accepting
a position or role in an institution or organization.
• Require (1) the parties know what they are agreeing to,
(2) no misrepresentation, (3) no duress or coercion,(4)
no agreement to an immoral act.
Kant and Moral Rights
• Individuals generally must be left equally free to
pursue their interests.
• Moral rights identify the specific interests individuals should be
entitled to freely pursue.
• An interest is important enough to raise to be a
right if:
– we would not be willing to have everyone deprived of the freedom to
pursue that interest
– the freedom to pursue that interest is needed to live as free and rational
beings.
Kant’s Categorical Imperative (First Version)

• We must act only on reasons we would be willing to have

anyone in a similar situation act on.
• Requires universalizability and reversibility.
• Similar to questions:
– “What if everyone did that?”
– “How would you like it if someone did that to you?”
Kant’s Categorical Imperative (Second Version)

• Never use people only as a means to your ends, but always

treat them as they freely and rationally consent to be treated
and help them pursue their freely and rationally chosen ends.
• Based on the idea that humans have a dignity that makes them
different from mere objects.
• It is, according to Kant, equivalent to the first formulation.
Criticisms of Kant
• Both versions of the categorical imperative
are unclear.

• Rights can conflict and Kant’s theory cannot resolve such

conflicts.

• Kant’s theory implies moral judgments that

are mistaken.
Libertarian Philosophy
• Freedom from human constraint is necessarily good and that all
constraints imposed by others are necessarily evil except when
needed to prevent the imposition of greater human constraints.
• Robert Nozick’s Libertarian Philosophy:
– the only moral right is the negative right to freedom
– the right to freedom requires private property, freedom of contract,
free markets, and the elimination of taxes to pay for social welfare
programs
Types of Justice
• Distributive Justice
– requires the just distribution of benefits and burdens.
• Retributive Justice
– requires the just imposition of punishments and penalties.
• Compensatory Justice
– requires just compensation for wrongs or injuries.
Principles of Distributive Justice
• Fundamental
– distribute benefits and burdens equally to equals and unequally to unequals
• Egalitarian
– distribute equally to everyone
• Capitalist
– distribute according to contribution
• Socialist
– distribute according to need and ability
• Libertarian
– distribute by free choices
• Rawls
– distribute by equal liberty, equal opportunity, and needs of disadvantaged.
Retributive and Compensatory Justice
• Retributive Justice = fairness when blaming or
punishing persons for doing wrong.

• Compensatory Justice = fairness when restoring to a person

what the person lost when he or she was wronged by
someone else.
Ethic of Care
• Ethics need not be impartial.
• Emphasizes preserving and nurturing concrete
valuable relationships.
• We should care for those dependent on and related to us.
• Because the self requires caring relationships with others,
thosae relationships are valuable and should be nurtured.
Objections to Care Approach in Ethics

• An ethic of care can degenerate into favoritism.

– Response: conflicting moral demands are an inherent
characteristic of moral choices
• An ethic of care can lead to “burnout”.
– Response: adequate understanding of ethic of care will
acknowledge the need of the caregiver to care for him or
herself.
Theories of Moral Virtue
• Aristotle
– virtues are habits that enable a person to live according to reason by habitually
choosing the mean between extremes in actions and emotions
• Aquinas
– virtues are habits that enable a person to live reasonably in this
world and be united with God in the next
• MacIntyre
– virtues are dispositions that enable a person to achieve the good at which human
“practices” aim
• Pincoffs
– virtues are dispositions we use when choosing between persons or potential future selves
Objections to Virtue Theories
• It is inconsistent with psychology which showed that
behavior is determined by the external situation, not moral
character.
– Response: moral character determines behavior in a person’s familiar
environment.
– Response: recent psychology shows behavior is determined by
one’s moral identity which includes one’s virtues and vices.
Unconscious vs. Conscious Moral Decisions
• Unconscious Moral Decisions
– Comprise most of our moral decisions.
– Made by the brain’s “X-system” using stored prototypes to automatically and
unconsciously identify what it perceives and what it should do.
• Conscious Moral Decisions
– Is used in new, strange, or unusual situations for which the brain has no matching
prototypes.
– Consists of the conscious, logical but slow processes of the brain’s “C-system”.
– Evaluates reasonableness of our intuitions, cultural beliefs,
and the norms stored in our prototypes.
What do you think?
} Which ethical theory do you think is the most commonly used in business?
} Provide evidence to support your assertion and give reasons explaining why
this theoretical approach is more likely than others to dominate business
decisions