CHAPTER 3

Theories of Ethics

LEARNING OBJECTIVES

This chapter will help the reader understand

■ The fundamental propositions of the major theories of ethics
■ Similarities and differences among different theories
■ Applicability of some theories of ethics
■ Critical appraisal of many of the theories of ethics
■ Concept and different contemporary theories of justice

INTRODUCTION
It was rightly said by Voltaire that if God did not exist, it would be necessary to invent ‘Him’. The
importance of God lies in creating in us a certain amount of obedience to godly virtues that help us
live the right kind of life, behave ourselves in a godly way and to mould our character through some
nomological axioms or principles by following divine examples. If God is not important, godliness
continues to remain a decisive human virtue. There are many theories of ethics that seek to discover
right and wrong moral behaviour. The basic purpose of ethics and morality is to help us lead a life
of beauty and happiness with all the divine qualities like righteousness, justice, non-violence, truth,
kindness, care and compassion, renunciation and love. In the following discussion, we will briefly
concentrate on some of the major influential ethical theories.
34 Business Ethics and Corporate Governance

TEN COMMANDMENTS
The Bible has given the following Ten Commandments to make followers morally good. The
Christian concept of a good man incorporates obedience, devotion and love to God and people. The
commandments are listed below.
1. Worship your God with all your heart, soul and mind.
2. Worship no idol, image or anybody except your God.
3. Observe Sabbath (the seventh day of the week) and keep it holy. None in your family including
your domestic help is to work on that day. It is a day of rest. It is the day of special worship to
God.
4. Do not use God’s name for any evil purpose.
5. Respect your parents.
6. Do not commit murder.
7. Do not commit adultery.
8. Do not steal.
9. Do not accuse anyone falsely.
10. Do not desire another man’s house, his wife, his slaves, his cattle, his donkeys, or anything
else that he owns.
It is to be noted that in Christianity, idolatry which was prevalent in many countries in the past
and even now is a sin. The tenth commandment needs a special mention. In modern times, the
expression,” do not desire…anything else” should mean anything valuable including money, gold,
diamond, silver, or any other assets or wealth that belong to others.
The whole purpose of these commandments is to make people socially and personally moral by
sacrificing rapacity, selfishness and irresponsibility.

ARISTOTLE’S THEORY OF GOLDEN MEAN

In our discussion of virtue ethics in Chapter 2, we had explained some important aspects of Aristo-
tle’s theory of golden mean. Virtue ethics is based on the idea of the golden mean. It is a virtue to
follow the middle course between excess and deficiency. In other words, according to Aristotle,
it is a virtue to follow the middle path because it requires some restraint and control of greed or
instincts. For instance, courage is the middle ground between foolhardiness and cowardice, which
are extremes and hence vices. The essence of Aristotle’s theory of golden mean is the idea that
moderation is a definite virtue to enjoy life and is the secret of a good and happy life. The attainment
of excellence (virtue) is dependent on self-control, clear judgment and symmetry of desire. How do
you achieve this? Aristotle observes that this is possible if we follow a life of reason and prudence.
However, if we want to do that, it is necessary to follow the golden mean or middle path.
The concept of golden mean is the characteristic attitude of every system of Greek philosophy.
Both Plato and Socrates followed and propagated this idea. In the temple of Apollo at Delphi, one
finds a motto engraved ‘meden agan’ (nothing in excess) (Durant, 1961, p. 99). Youth is the age of
extremes when he commits mistakes. When a person matures with reason, wisdom and prudence,
he comes closer to the middle path.
 Theories of Ethics 35

The Greek philosophical idea on the golden mean is entertained by Buddhism. Buddhism advises
its followers to adhere to the middle path by abandoning the sufferings of a very strict ritualistic life
on the one hand and the pleasure and easy-going life of a worldly man on the other.
Aristotle says that the road to achieve excellence is the middle way (golden mean) which can
save you many detours and delays. The qualities of character, according to Aristotle, can be struc-
tured in triads, for each of which the first and last will be extremes and vices, and the middle quality
is the virtue for excellence. Thus, between humility and pride, we have modesty; between quarrel-
someness and flattery, we have friendship, and between Hamlet’s indecisiveness and Quixote’s
impulsiveness, we have self-control (Cf. Aristotle’s Ethics). However, it should be noted that the
golden mean is not as exact as the mathematical mean (average). It is a flexible concept and is
discovered by a mature person through the application of reason when confronted by different
situations in life, training, experience and habituation.
However, as we had discussed in Chapter 2, it is not possible to follow the golden mean for
actions like murder, theft, adultery, and so on (Beauchamp, 1982, p. 162). In the Nichomachean
Ethics, Aristotle puts forward the idea that character building is essential for a happy and meaningful
life. However, character is based on virtues. Virtues and moral values are inter-related in many ways
and with constant practice a person can acquire the disposition of a person of good character. In
this context, habit-forming is of prime importance. The golden mean is not only the right quantity
but it occurs at the right time towards the right people, for the right reason and the right manner
(Christians, et al., 2005, p.13). Aristotle explains that in order to be happy, some external aids are
necessary; and only the golden path will not suffice. One of the important external helps comes
from friendship.
Further, some philosophers observe that the mean is not always the middle path. In several
cases, the involved moral dilemma can be solved by leaning more towards one extreme than the
other. This is evident in cases of decisions regarding pay rise of employees or allocation of office
responsibilities.

ARISTOTLE’S NICOMACHEAN ETHICS

Aristotle’s Nicomachean Ethics (NE) is a comprehensive work on several types of ethical issues
and principles. It is now studied as a part of historical philosophy. NE might have been edited by
his son Nicomachus, or possibly, the work was dedicated to Aristotle’s son. Whatever its value,
there is no denying that it is a major work on Aristotelian ethics. The work was published in 350
B.C., which was later translated too. W.D. Ross made a very authentic translation of NE in English
language.
The work consists of ten distinct books on ethics. These books are:
Book I
It discusses what is good for human beings. In this context Aristotle explains the meaning of the
concept of good and why and how a man can be good. He also explains happiness as the supreme
goal of life.
36 Business Ethics and Corporate Governance

Book II
This book concentrates on the analysis of virtue which was discussed in detail in chapter two.
Book III
It elaborates on some aspects of human virtue including courage, temperance and generosity. The
analysis is continued in Book IV.
Book IV
It goes on illustrating some moral virtues like gentleness, truthfulness, wit and charm.
Book V
It makes an analysis of justice and fairness, and gives examples of the essentials elements of just
action and behaviour.
Book VI
This book dwells on intellectual virtue by illustrating his points of view.
Book VII
It discusses pleasures and evils, and the situations when pleasure leads you to evil. In this context,
the book gives clarity to ideas of continence and incontinence.
Books VIII & IX
It elaborates on friendship which, according to Aristotle, is perhaps the best virtue. In this connection,
he explains the advantages of friendship and, the qualities and requirements of a good friend.
Book X
The book is devoted to a detailed discussion of pleasure and politics. Aristotle believes that a good
life is possible through properly practiced politics.

Lessons from the Nicomachean Ethics

NE explains the highest good in life is eudemonia (well-being or happiness) which can be achieved
in accordance with virtues (excellence) in a sustainable way so that it permeates the human psyche
throughout the life. NE shows how it is possible to be a good or virtuous man. Virtuous actions are
possible through right actions, right habits and right character. The idea is similar to the philosophy
of Buddhism. Like Aristotle, Buddha has also advised you to practice right understanding, attitude,
action and speech (vide Chapter Ten of this volume).

UTILITARIANISM
Utilitarianism is a teleological theory regarding what we ought to do. It is a normative ethical
principle of judging the right or wrong of a human action. According to this theory, social welfare
is the sum of the well-being of all individuals. What should human beings do? The answer can be
teleological or deontological. Deontological theory says that one’s duty is of ultimate importance.
Teleological theory points out than in the ultimate analysis, we should do only those things which
can bring the highest level of happiness to the greatest number of people. It considers the utility of
 Theories of Ethics 37

rules or laws, and is therefore, more concerned with policy formulation. Utilitarianism states that
man’s worldly happiness is the only good. This is a normative-positive test of all policies, actions
and institutions.
The motto: “greatest good of the greatest number”, was first voiced by Francis Hutcheson.
Utilitarianism developed between the late eighteenth century and the last quarter of the nineteenth
century. The main proponent of this philosophy is Jeremy Bentham who is revered as the father of
utilitarianism. The other prominent members are David Hume, John Stuart Mill, Henry Sidgwick
and Francis Hutcheson. Bentham introduced the doctrine of utilitarianism in the analysis of
social action and policy. In the Greek period, utilitarianism was regarded as a form of hedonism
(Epicureanism).
The classical concept of human nature is Benthamite in essence, which states that although
human beings are selfish by nature, the selfishness, teleologically brings some social benefits.
This is also the essence of Smith’s theory of naturalism and optimism. As a matter of fact, policy
prescriptions of the classical writers exude utilitarianism. In this connection, one can think of corn
laws, factory regulations, poor laws and tariffs.
The neoclassical-marginalist school extensively used the concept of Utilitarianism since its
inception in 1870s. Neoclassical writers, like Vilfredo Pareto, Leon Walras, William Stanely
Jevons, Francis Ysidro Edgeworth, Alfred Marshall and P. H. Wicksteed were all utilitarians. The
neoclassical school was really based on the concept of utility maximization (economic man).
The neoclassical economists used the concept of diminishing marginal utility and interpersonal
comparison utility to demonstrate that overall utility will increase if there is a transfer of income
and wealth from the affluent section of the people to the poor. The richer section will lose some
utility in this case but the gain of utility received by the poor people will be more overwhelming.
This is one of the reasons why a system of equal distribution of income was preferred.
Welfare Economics, especially that propagated by Pigou and Pareto, begins with the concept of
welfare that is tantamount to utility. Pareto lays down the condition that an optimal situation is one
where the general utility (welfare) cannot increase without jeopardizing the utility of anybody else
(Pareto Optimality). The notion of neoclassical economists (Hicks, Bergson and others) is based
on the idea that welfare gains or losses are really utilitarian in essence. In our times, J.C Harsanyi,
among others, advocates the maximization of average utility (preference). He prefers a social utility
function without envy and jealousy. He advocates a policy that safeguards against our being worse
off. He recommends social cooperation and emphasizes the need for moral principle in human
action. Utilitarianism as an approach to moral action is popular in contemporary American society
(Day, 2006, p.70).
The concept of utilitarianism has many loose ends and it means many things to many people. The
following are the basic meanings of utilitarianism:
● Greatest good of the greatest number

● Maximization of pleasure

● Minimization of pains

● Maximization of happiness

● Satisfaction of desire

Although there are various meanings and versions of utilitarianism, there is one common
philosophy underlying all these notions. They are basically concerned with the consequences of
38 Business Ethics and Corporate Governance

an action or judgment. The philosophy is anti-Kantian, in the sense that unlike the Kantian idea, it
does not emphasize the intention of the moral action but on its end-result, the consequences.
It is a philosophy which is the same as that of consequentialism. In the case of utilitarianism, the
end justifies the means.
The theory of utilitarianism is sometimes interpreted in terms of cost and benefit analysis
(CBA). An action is acceptable if the net benefit (benefit minus cost) is the greatest in a project
as compared to other available projects or policies. The concept of utility involved in the theory
of utilitarianism has been interpreted by many as net benefit. There are basically two variants of
utilitarianism—Act Utilitarianism and Rule utilitarianism. (Brandt, 1959, pp. 253–54, & Smart
and William,1973, p. 4).
Act utilitarianism is concerned with those actions which will bring great benefits to great number
of people. However, in case of act utilitarianism, the problem arises because some acts are by
themselves not socially acceptable like stealing. Hence, act utilitarianism has to be supplemented
with rule utilitarianism which gives direction to the former. An action in all cases may not bring
about the greatest good of the greatest number. Obedience to rules (say traffic rules) will prevent
chaos and will maximize happiness of passers by reducing accidents. However, the fact that
“stealing is not acceptable” is not always correct to rule based utilitarianism, because sometimes,
stealing can save innocent lives too (Weiss, 2009, p.75). Suppose accidentally John has been caught
by a terrorist outfit and is asked to join the gang. He has agreed to do this by force and by nature,
he is a moralist and does not want to kill anybody. The gang is making a plan in the night to plant a
very heavy and powerful bomb in the congested railway station of New Delhi. If this is successful,
the bomb will kill human lives. In the middle of the night, John steals the bomb and runs away
from the place just to save human lives. He may be caught later and might be killed. But he is not
concerned with that. This act of stealing, as many will agree, is not a sin. It is a correct action as per
the philosophy of utilitarianism.
Utilitarianism based on the principle of CBA is an important part of decision–making in modern
organizations and institutions. However, the concept of utilitarianism has a number of conceptual
problems. Firstly, one needs to define utility in a unique manner. We have already seen that it has
been given different meanings by different proponents. Utility is subjective and mental, and this
raises an epistemological question: how do we gauge a person’s happiness or feeling of pleasure or
goodness? (Hoffman and Graham, 2010, p.180). Secondly, another tricky issue is the measurement
of utility. Many people believe that being a subjective concept, utility is not measurable. However,
there are two important ways to measure utility. Alfred Marshall, the leader of the neoclassical
school of economics, said that the utility that one is expecting from a commodity can be indirectly
measured by the amount of money he is prepared to pay for it. However, in the case of social policy
or action, the application of market valuation approach to measurement of utility becomes difficult.
Hence, when utility is measured in this way, we get cardinal measurement. As opposed to this, we
can get another type of measurement (ordinal measurement) where utility or satisfaction is ranked
(from highest to lowest, or vice versa). In the ordinal sense, utility leads to preference satisfaction.
However, in the case of preference or ordinal ranking, we can only rank different utility functions
to know which is better (or higher) but we cannot say by how much.
 Theories of Ethics 39

Limitations of Utilitarianism
● The theory is incoherent simply because you cannot maximize two numbers at the same time
(greatest happiness and greatest number).
● Utility is essentially a subjective concept. There is no acceptable definition of “good”.

● The concept (happiness) means different things to different people. There are also multiple

meanings of the concept of utilitarianism.

● In the case of utilitarianism, the end justifies the means. This idea has been vehemently criti-

cized by many. It is said by critics that for a moral action, both the end and the means must be
good. To many, the means justify the ends, and not the other way round.
● Utilitarianism does not consider individuals or minorities. It does not care for individual

entitlements, rights and distributive justice.

● There is a critical question that utilitarianism does not answer. Suppose some actions are by

nature morally wrong, but their consequences are good. Utilitarianism will support those
actions. But then this will not prima facie entitle the theory to be a moral theory.
However, in spite of its many conceptual limitations, the movement of utilitarianism has been
instrumental in saving the conditions of common people. The philosophy of utilitarianism stood
for the aspirations of the middle class. It has been the basis of many reformative movements in the
fields of legislation, politics and socio-economic institutional changes around the world.

THEORY OF CONSEQUENTIALISM
A consequentialist philosophy is based on consequences of actions. Some human actions which are
good for society at large are regarded as good actions. It is the outcome of the action on the society
which is important. A consequentialist theory is end-based (teleology). If the consequences and
end are good, then it can be recommended for implementation; otherwise not. Consequentialism
embodies in itself two important schools of moral philosophy. These two schools are utilitarian and
teleological schools. We have discussed earlier the basic ideas of utilitarian thought. Hence, there
is a need for a separate discussion on the teleological theory.

TELEOLOGICAL THEORY
Greek philosophers, in particular Aristotle, popularized the teleological theory. The word teleology
is derived from telos which means the end or consequences. Thus, the theory of consequentialism
is directly associated with the teleological theory. There are indeed many variations of the theory
of teleology. At the one extreme of the teleological theme, there may be egoism and at the other
extreme, there is utilitarianism as suggested by Bentham and J.S. Mill. Utilitarianism provides a
criterion for the concrete decision-making process to choose an action or policy. An action is taken
only if it maximizes the net utility or benefits from the given circumstances, and also, the project
is accepted if it is the best among all the available projects in terms of net benefits. Thus, there,
apparently is a moral basis of choosing the project. However, the net gains or benefits may also be
yielded by a project which is otherwise not supportable on moral grounds. The cost-benefit calculus
40 Business Ethics and Corporate Governance

that is used for the calculation of projects in the context of utilitarianism does not say much about
morality.
Egoism which is a form of teleology accepts any decision which produces individual gain or
benefit. These benefits include pleasure, power, name and fame. An egoist will choose a situation
which will increase his personal gain or satisfy his ego. The basis of egoism is self-interest. Many
people are of the opinion that an egoistic person or organization is governed by self-interest. They
will go to any extent to maximize their gains and objective functions. They are short-sighted and
unethical in principle. However, there is another variety of egoism known as enlightened egoism
which is socially better than pure egoism. Enlightened egoism takes into account a long-run
perspective and also allows for the welfare of people and society, but in every case, the self-interest
remains the primary consideration.
Another aspect of teleological theories, especially utilitarianism is the focus on minimizing harm
to affected individuals. This makes the theory popular in the public eye. Rule-utilitarians follow
certain rules to maximize their gains or net utility. They support the rule of laws in a country as
they believe that by following rules, the society can maximize the total gains. However, if there are
alternative rules in a particular situation, the utilitarians will choose that rule which would promote
greater utility. There may be a problem with the rule-utilitarians. They will not bribe anybody
because this is the law of the land. However, if bribe giving can lead to larger benefits than the
cost, then they will perhaps bribe officials to gain some favours. Suppose Smith is a utilitarian like
Robin Hood. He always helps people in distress. Smith owns a big business house where several
poor people work. Smith has applied for a contract to supply goods to a multinational company, but
he is not sure about getting it. In that case, Smith will not hesitate in bribing the MNC boss to get
the contract. He is the follower of correct conduct but in this case, he makes an exception otherwise
he will have to retrench his poor workers. Thus, bribing helps him maximize the utility (benefits) of
his employees. So, for a rule utilitarian, rules give him a guideline and at times, he violates them.
To an act utilitarian, bribery is acceptable if it leads to maximum gains or net utility. If corruption
can save many lives, both act and rule utilitarians will perhaps support it.
Teleological theories do give a definite perspective to make moral choices by comparing compet-
itive alternatives, and the relative impact on people. On this count, the consequentialist theory fares
better than the theory of deonticism. Teleological theories are, however, criticized on the ground
that they rely too much on unknown and uncertain results, and neglect the rights and needs of
minorities. These right and needs may be in conflict with those of the majority.

KANTIAN DEONTICISM AND CATEGORICAL IMPERATIVES

The Greek word “deon” means duty. Deontology refers to a particular type of ethical behaviour
based on rights and duties and not merely its consequences—it is the intention or motive that
matters rather than the consequences of the overt action. Thus, deontologists are non-conse-
quentialists which is governed by certain dos and do nots. As per the principle you should not steal
or kill even if they lead to maximum gain or happiness. The principle of deontology is based on the
idea of correctness or rightness of moral behaviour. However, there are absolute moral behaviour
patterns that are recognized universally as good behaviour, like respect your parents and elders.
 Theories of Ethics 41

According to deontologists, the nature of moral principles is permanent and stable. The perfor-
mance of these principles into action determines the degree of ethical behaviour of an action. What
is right or wrong is an individual perspective based on virtue and values which are acquired from
nomological axioms, tradition and culture. However, it must be pointed out that whilst teleological
philosophers give more emphasis on the ends associated with an action, deontological philoso-
phers emphasize the means.
The philosophy of deonticism has found its best expression in the hands of Immanuel Kant
(1724–1804), a celebrated German philosopher. Kant advised us to do that act which can be
universalized and ‘do that unto others which you want them to do to you’. The principle is stated in
the Bible: “do not judge others; otherwise, you will be judged.” Your good act must be an example
of universal behaviour.
Kant is the leading founder of the principle of universalism. This is also known as deonto-
logical ethics. It is a kind of non-consequentialist ethics. The basic idea of this ethical principle
is that the ends can never justify the means of an action. Universal ethical principles are based on
justice, rights, fairness, honesty and respect (Kant, 1964). Kant makes it clear at the beginning
that:
1. Morality is impartial. It applies equally to everybody.
2. Morality is concerned with our intentions and not necessarily with the consequences of our
actions.
There are two types of deontologists: Act deontologists and rule deontologists. Act deontolo-
gists believe that the ethicalness of a person can be known by his overt actions which should be
based on justice, fairness, benevolence, equity and kindness Kant (1972, p. 229). Act deontologists
observe that deontological rules provide only guidelines. In other words, act deontologists insist
that people should have some knowledge about certain rules which are right and act accordingly
without any reference to deontological rules.
Rule deontologists believe that there are certain rules of morality that people should follow while
making decisions. These rules are framed on the basis of moral and logical principles to guide
human actions. The ethicalness of a person’s behaviour is to be decided on the basis of these rules.
Kant’s categorical imperatives and the Ten Commandments of the Bible provide some of these
rules. These rules guide ethical behaviour and actions which eventually override other contextual
local practices.
Categorical imperative has the following two building blocks:
● A person should choose to act in a way which is acceptable to him if another person acts in

the exact same behaviour in that same situation.

● In the situation of an ethical dilemma, a person should act in a way that respects and treats all

the others involved as ends as well as means (Friedman, 1978, pp.119–28).

The first principle is absolute and it does not admit of any exception under any situation.
Categorical imperatives are the guidelines that will allow the decision-makers to do their duties in
such a responsible way that all persons involved will be respected and not neglected.
42 Business Ethics and Corporate Governance

Criticism
● Sometimes other elements in a deal become compelling before the narrow sense of duty.
Smith is performing an important official duty on which the lives of many innocent people
depend (e.g., negotiation with the terrorist group). Suddenly there is a call from his house
conveying his mother’s deteriorating health. What will Smith do? Both require his attention
and involve his duties. The theory of deonticism is silent in such cases.
● It is often difficult to follow your duties blindly when confronted by a situation that demands
immediate attention. Smith is in front of a city traffic light when suddenly the green signal is
put on and all vehicles start moving. His duty as a pedestrian is not to cross the road. However,
he finds that a small boy is running through the road. Smith runs across the road without caring
for his life just to save the life of that small boy. Is it a deontological act? Many deontologists
will say that Smith should not cross the road when the green signal is on.
● There are examples that show that Kant’s theory of morality goes wrong. For instance, an
employer in Iran pays lower wages to a woman employee for the same job compared to the
man, and it is accepted by the woman. According to Kant’s theory, the employer is acting
morally in this case. But critics may point out that this is basically unethical because gender
discrimination for the same work (both quality and quantity) is morally wrong.
● It is not a good behaviour to follow blindly one’s own duties as directed by your boss. The
duties may be wrong or immoral. The boss asks Smith to mix water with milk. Should Smith
perform such a duty? There may be a conflict in many cases between duty and morality, or
between right and wrong duties. Deontological principle does not clarify these conflicting
cases.

CONSEQUENTIALISM VS DEONTICISM: A RECONCILIATORY APPROACH

Utilitarianism and consequentialism are used in the ethical theories in the same sense, since both
these doctrines depend on the end-result of an action. However, on keener observation they are not
the same. Utilitarianism is based on the notion of net utility maximization. It is a social policy or
action that seeks to yield greatest happiness or utility for greatest number of people. The method-
ological approach followed to measure the net utility is the cost-benefit approach (CBA) where
the value of total benefits is greater than that of the cost of the project. There are many conceptual
problems in such a type of calculation. We will mention only a couple of these problems.
What is happiness (or, good) or utility? How will you measure it? There is indeed no satisfactory
answer. In terms of the CBA approach, the net benefit is accepted as the appropriate criterion
to accept a project or policy. However, the project may generate a net benefit and yet, it may be
entirely unethical.
Our contention is that consequentialism is different from utilitarianism. The former simply
depends on good consequences for a policy to be supported but the latter has nothing to do with any
consequences other than utility. On the other hand, consequences may be of many types. We may
retain the consequentialist structure of the utilitarian theory but reject the notion of utility which is
a highly objectionable quality (Mackie, 1990, p.149). The concept of utility or goal can be replaced
by some sort of concrete entity which can be quantified or objectified.
 Theories of Ethics 43

One can consider in this context, the gain or loss in terms of some basic political or social goods
like liberty and freedom. The basic economic goods that may be considered are the basic necessities
of life without which life will be impossible. If consequentialism leads to the availability of more
of these basic or primary goods, then nobody will have any objection to utilitarianism or conse-
quentialism, and they can be said to be the same in essence. The basic point that we are driving
home is that you should develop non-utilitarian consequentialism. The same idea was proposed
by Mackie (1990) but it was not fully developed by him.
The consequentialist structure can be modified by introducing some moralistic rules, principles,
duties and rights or virtues. If we do so, it will merge with the theory of deonticism. The impact
of the theory of deonticism can be reduced by taking away those duties that are contrary to moral
principles. In deonticism, duty is the main consideration. However, not all duties are morally correct;
some duties given to you by your superior officer may be morally wrong. So, one is justified in
rejecting those duties. We should include in deonticism only those duties that are based on those
rights that will increase social welfare. In such a way, one can think of a reconciliation between
consequentialism and deonticism. Consequentialism will lead to the production or availability of
more of primary goods or services and deonticism will lead to more social welfare. Such a recon-
ciliation can retain the basic philosophy of both the principles and make them complementary to
each other.

RIGHTS AND DUTIES

Right is the entitlement or empowerment to do certain things. For instance, a teacher is entitled
to teach in a class and a priest is entitled to worship. Rights are moral claims of individuals
recognized by society. There are many types of rights, like, legal, constitutional, fundamental and
moral. Right gives us the liberty and choice and empowerment. There are many basic rights given
to every citizen of a country. These rights include life and security, education, freedom of speech,
employment, express opinion, legal remedies, contractual right, equality and human rights. Rights
are based on several sources of authority (Tuck, 1979). Moral rights give individuals the freedom
to pursue one’s own interest so long as the interests of others are not violated. Moral rights need
to be justified, and they are necessary for self-realization. These rights are essential for the highest
personal good and social benefits.

Negative and Positive Rights

Negative rights are rights to be free from interference by others; life, liberty and property rights,
according to Robert Nozick (Dienhart, 2000, p.124). This view of Nozick is not accepted by several.
Positive rights are those that others have a duty to supply. If you have a right to education, others
must supply schools, teachers and books.
Kant and Rawls argue that rights are based on your intrinsic value. Rights vary between different
social groups as there are many traditional ways of respecting and expressing human worth and
dignity (Dienhart, 2000, p.124). To Nozick, your intrinsic value resides in your fundamental right
to life, liberty and property; to Kant, it lies in your ability to make rational decisions and duties to
44 Business Ethics and Corporate Governance

respect all human beings and to do what is morally good. To Rawls, your intrinsic value lies in our
ability to do justice based on free and fair distribution. John Locke observes that human beings have
natural right to life, liberty and property; and by virtue of a social contract, the state is assigned
rights to protect them. The purpose of the state is to ensure that people respect and do not violate
each other’s rights.
Hohfeld (1923) considers all rights as relationships. There are four types of rights:
● Claims (A claim entitles a person to demand something from another person).

● Privilege (Liberty/No-claim. Therefore, one is free to do something).

● Power (A legal relationship or claims can be created by power to control others).

● Immunity (This enables a person to resist the powers of others over a person having immunity).

It disables others.

Duties
Rights and duties are correlative terms. Duties are moral obligations. The main duties that a person
should perform are as follows:
● Respect for truth

● Respect for laws

● Respect for society and the state

● Respect for life

● Respect for freedom and personality

Duties are determined by the status and particular station of life.

There are generally three classes of duties:
● Duties to self (health, self-development, capability expansion and so on).

● Duties to others (duties to family and friends, relatives, neighbors, society, humanity, animals

and plants, and the country).

● Duties to God (devotion, prayer, meditation, worship, communion and love for God)

Kantian Theory of Duty (Categorical Imperatives)

Immanuel Kant distinguished between duties of perfect obligation and of imperfect obligation.
The former duties are generally duties which are precise and definite and can be exacted from
individuals. The latter duties are mostly positive and are indefinite, unlimited, and cannot be exacted
from individuals.
Kant explains that you have to act ethically irrespective of the need of others. There are four
principles of Kantian theory of Duty (see also the earlier discussion on Categorical Imperatives in
this chapter):
● Morality of your action depends on what you intend to do and not on the consequences.

● Moral rules are impartial, and these apply equally to everyone.

● An action is moral only if you can justify the rule that everyone can follow.

● People are not merely means to an end. They should be treated as human beings with

infinite value.
 Theories of Ethics 45

There are two precise rules for determining a morally right duty in the Kantian Categorical
Imperatives.
Reversibility: It implies that you should perform your duty involving others in such a way that you
will like others to perform their duties towards you in exactly the same way.
Universality: A person’s justifications for acting in a particular way should be the so exemplary
that they will induce others to act in the same way. This is why your action must be universal in
nature.

Robert Nozick’s Ideas on Duty

● In Robert Nozick’s view, it is the duty of everyone, in particular the state, to ensure that
there is no restriction on freedom for people and there is no coercion imposed by the state.
However, when a person is coercing others, his freedom may be restricted.
● Like Kant, Nozick asks everyone to regard individuals as an end and not as a means to an
end.
● The ideals of free market should be promoted.
● Since the basic rights to life, liberty and property are negative in character, it is duty of the
state to ensure that these rights are not violated.

ROBERT NOZICK’S THEORY OF ENTITLEMENT AND PROPERTY RIGHTS

Robert Nozick is an American philosopher and Nozick’s publication (1974) has been a controversial
but an interesting book. In the following analysis, we will explain the main points of Nozick’s theory
of entitlement and property rights. These two concepts are inter-related. His entitlement theory (ET)
is a theory of distributive justice. He refers to the holding in private poverty as something related to
justice in holding (1974, p.150). To him, private property indicates self-ownership. Nozick is a liber-
tarian and gives too much emphasis on freedom in every matter including the acquisition, transfer
and disposal of property. But freedom is to be punctuated by justice. There are three important
constituent elements of ET:
● Principle of justice in the acquisition of private property.

● Principle of justice in the transfer of private property.

● Rectification of injustice in the case of unjust transfer of private property.

If justice is followed in the case of the first type of holding, the possessor has the right to
entitlement. Similarly, if principles of justice are followed in the case of the second type of holding,
the possessor is entitled to that holding. Nozick warns us by saying that none is entitled to justly
hold any property except through cases One and Two as stated above. ET upholds the view that
there should be justice in the distribution of property (holdings). The purpose of the Third rule
(stated above) is to protect the weaker sections who have been victimized in property matters.
It is quite possible that the wealthy, influential or powerful people might have cheated the poor
possessor in a deal. It is, therefore, necessary to enforce the correct principle of rectification so that
the loser gets proper compensation.
46 Business Ethics and Corporate Governance

Two important influences have been the bases of Nozick’s ET. It is firstly based on John Locke’s
ideas on private property. The second is the philosophy of Immanuel Kant who has suggested that
people are ends in themselves and all of them, in a sense, are equal. The basic idea of Nozick’s theory
of entitlement is to create a strong system of property rights and the operation of a free market
economy. He is of the opinion that a voluntary transfer of property is a just transfer. Transfer under
duress, temptation or false promise is unjust.
In this context, Nozick observes that taxing rich people in the name of social programmes for
the poor and also the redistribution of income from the rich to the poor is inherently unjust. This
is so because the state is collecting money by coercion rather than through voluntary transfer or
transactions.
In the case of the creation of any value or product, the creator has the right to enjoy or use it
in any way he/she desires. It is unjust to dispossess the rightful holder or creator by temptation or
force. If somebody has the just right over something, then justice demands that this right should not
be violated (Nozick, 1974). The entitlement theory of Nozick goes against the two popular theories
of distributive justice.
● Nozick does not agree with the Marxian theory of equality. According to Nozick, inequality

is natural. Equality is a contrived notion that is unjust and unnatural.

● Nozick also does not believe in the difference principle of Rawls. He dislikes the idea that

there should be redistribution of income or goods from the rich to the poor.
Nozick’s entitlement theory is unpatterned and historical. His unpatterned theory is based on
choice. His entitlement theory is against the violation of property rights. Although the entitlement
theory looks like something original, it is not free from criticism.

Criticism against Nozick’s Theory of Entitlement

● Nozick’s view that taxation is unjust is not true. In many cases, the tax payers receive quid pro
quo (benefits in return).
● Nozick is not completely accurate in assigning a minimal role to the state. In fact, to ensure
property rights and to introduce compensatory justice, a strong role of state is very essential.
● Nozick is in favour of proper and voluntary bequests. However, bequests in the long run show
all the evils of unearned income, inequality and loss of productivity. It draws us more towards
feudalism than a free market economy that Nozick favours.

W.D. ROSS’ SEVEN PRIMA FACIE DUTIES (RULES)

W.D Ross (1877–1971) was an American intuitionalist who has given seven absolute moral rules
for human beings to live a happy life. These rules (see Ross, 1930) are:
Fidelity
This is essential to maintain a good relation in a society by keeping promises and being honest in all
situations, and respecting the rule of mutual trust. The whole structure of any long-term relationship
is based on trust or fidelity.
 Theories of Ethics 47

Justice
In dealing with people and in the distribution of basic goods, justice and fairness should be practiced
by people. The idea of justice is based on equity and fairness. Without justice, no moral rule or
dealings can be made effective in a society.
Gratitude
Gratitude is basically an individual virtue that makes life enjoyable and pleasant. It is necessary to
return a favour by words or deeds of gratitude. It makes a person endearing, and he becomes worthy
of favour in the future.
Reparation
It is a kind of compensation for the injury and harm done to others. This is a form of justice.
Reparation should be proportional to the damage done. Although in many cases, the appropriate
type and amount of reparation cannot be made, it is a good moral rule to make a compromise by
both the parties involved.
Beneficence
You must be benevolent in nature and do good to others whenever necessary. Thus, kindness and
compassion are important in reducing the impact or eliminating undesirable situations.
Non-malice
This means the prevention of injury or harm to others. This is possible only when it is non-violent.
This moral duty also implies a mindset that does not bear ill to anybody. It shows equal love and
good relation with every person.
Self-improvement
Ross’s rules do include provisions for constant self-improvement by practicing virtues and a value
system in accordance with the principles of morality. Unless people are constantly inculcating the
principles of good moral behaviour and applying them in actual practice, self-improvement does
not become possible.
Ross’s prima facie duties are concerned with what people ought to do. Many philosophers do
not consider these rules to be duties. They observe that these should be called responsibilities. Ross
calls these rules as prima facie duties because while deciding to act, all these rules (duties) need to
be taken into consideration. No duty should be considered in isolation. It is for this reason that you
must follow the principle of ethical pluralism.

ALBERT CARR’S THEORY OF BUSINESS ETHICS

In an interesting article in Harvard Business Review (1968, pp. 2–8), Albert Carr favours business
ideas which reminds you of a similar stand taken by Adam Smith and Milton Friedman. Both Smith
and Friedman have pointed out that the first ethic of a businessman is to do his duty in such a way
that leads to the maximization of profits. Albert Carr goes one step further by saying that the profit
maximization principle should be followed by business people even if it involves lying. According
to him, deception is a legitimate part of business. He compares business with poker games. In such
a game, there are rules, but within the broad framework of rules, it is permissible to bluff in order
48 Business Ethics and Corporate Governance

to mislead or hoodwink the public (customers or suppliers). Carr warns the business people that if
bluffing is not done, there is a possibility that the business will undergo losses. In such a case, there
should be a distinction between business and family life. Family ethics and values are not relevant
in business. A businessman may be ethical in his private life but he cannot apply the same moral
principles in his own profession (business). The two worlds are entirely different.
Carr approves of the following types of business tactics to maximize profits:
● Deception (say, in a business like food processing products).

● Neglect of safety devices (say, in automobile industry).

● Utility companies that practice regulatory capture, bribe government officials to extract unduly

large payments from electricity users.

In all these cases, companies are justified in bluffing to earn more profits. So like in poker, Carr
observes that deception is not considered to be a bane. It is a part and parcel of the game. However,
Carr cautions, that companies should comply with the spirit of the law. Bluffing is justified; but
should be done very discreetly, so that one is not legally caught. Advertisement such as “This is the
best product in the market” is acceptable. But malicious deception is wrong, as it intends to harm
other people.

Critical Appraisal
Carr’s theory can be supported on the following two grounds:
● Carr’s theory can be supported on teleological ground. The telos (end) of every business

enterprise is to maximize profit. Carr supports the idea that ends justify the means. A teleo-
logical theory does not imply that means need be ethical. So in order to maximize net gains,
business people can be unethical.
● Carr’s thesis can also be supported on the basis of ethics of utilitarianism or consequen-

tialism. A businessman knows the consequences of his actions while maximizing his profit.
His utility or “good” lies in this materialistic behaviour. Thus, his actions can be supported on
the ground of utilitarianism.
● But if the intention of the business enterprise is to cheat customers and suppliers and to

produce financial losses to them, the actions are wrong, according to deontological ethics.
Such deception is wrongful behaviour. However, there is no objection to profit maximization
if it is done in an ethically correct manner. Business in practice cannot go beyond a certain
limit. Carr is aiming at proving too much at the same time and making unwise suggestions.
Carr seems to believe in ethical relativism. He points out that whatever is ethical in in a family
is not ethical in business. A business has its own ethics.

CONCEPTS AND THEORIES OF JUSTICE

Philosophers observe that there are three worthwhile things in this universe and none of them
can be defined in a compelling way. They are: truth, beauty and justice. The word “justice” has
several definitions. In the perspective of bounded human rationality, we will make an attempt here
to analyse a few well-known theories of justice. Before beginning a discussion on a few cognitive
theories of justice, it is necessary to explain briefly a few relevant concepts of justice.
 Theories of Ethics 49

What is Justice?
The term “justice” is derived from the word “just”, which means “appropriate”, “proper” and “fair”.
The word “fairness” is regarded as the most appropriate equivalent to the term “justice”. When a
treatment is accorded to a person in proportion to what he deserves, he can be said to be treated in
a just way. For instance, when a labourer is asked to work and paid wage equal to the market value
of his physical productivity, the payment is based on justice. Justice is something which can be
regarded as reasonable on both moral and empirical grounds. Justice is a normative social order.
It is a form of righteousness. When some people are in bondage, justice implies freedom to them.
Absolute justice is divine and is difficult to achieve in the real world. In the actual practice, we
come across what is known as relative justice.

Types of Justice
There are many types of justice. These are briefly explained in the following pages.
1. Procedural Justice
There may be justice in an act. However, what is important is to see whether that action has
been performed complying to the law or through a correct procedure. For instance, a labourer
is asked to do a job but is forced to accept the terms and conditions imposed by the employer.
Here the procedure is unjust. In the same way, the property of a poor person can be trans-
ferred or sold in an illegal manner or by force. These types of action go against the procedural
justice.
2. Commutative Justice
Commutative justice is a form of justice where fairness or justice is ensured at the beginning
and all people are treated equally. In other words, people start on the level field. The background
of the people is totally irrelevant in the case of commutative justice. Commutative justice also
ensures that all people are given equal opportunities for development. Further, the fairness of
exchange between two or more parties involved is of prime consideration. Thus, it is said that
the remuneration to a factor of production must be equal to its marginal productivity. In such a
case, there is no exploitation; and justice is done to the factor of production. It is in this sense
that the neoclassical theory of distribution can be said to be just.
3. Compensatory Justice
In the case of compensatory justice, some compensation is given to the person who has been
treated unequally in the past. The point is that the compensation for the injustice done in the
past must be proportional or equivalent to the loss sustained by an individual in question. But,
in many cases, it is difficult to assess the appropriate amount of financial compensation. For
instance, if somebody has lost his hand while working in a factory, what would an accurate
compensation be? The payment of a particular amount sanctioned by the factory or by a legal
institution may not take into account his all-round incapability, social stigma and future losses
in the absence of his hand. However, in the present social system, some amount of compen-
sation is granted, depending not on the requirements of the loser but on the capability of the
person giving the compensation. Sometimes, it so happens that the payment of compensation
50 Business Ethics and Corporate Governance

is either too low or too high for a prolonged period. This may lead to reverse injustice. For
instance, the granting of some special favour to backward classes or castes for a very long time
may mean injustice to higher castes or classes of people. This may create reverse injustice to
these classes and castes.
4. Retributive Justice
This ensures some form of punishment to a defaulter. The imposition of fines or penalties,
however, may not be adequate or just in a particular situation. Sometimes, the punishment
may be more than what is needed and sometimes, it may be less than what is necessary. There
is no objective criterion to impose just punishments in several cases, whether it is fixed by
the court of law or done by a particular person to whom wrong has been done. Thus, where
simple fine should be imposed, the authorities may order rigorous imprisonment. The basic
purpose of retributive justice is to prevent the person from doing similar type of unjust work in
the future. This is often not done in actual practice. In the case of retributive justice, the main
criterion for punishment should be the motivation for the crime or what is called mens rea. If
the motive for the crime is not established beyond reasonable doubt, it is unjust to impose any
punishment.
5. Communitarian Justice
This refers to a system of justice shown to a particular community which has been suffering
in the past from injustice (say, the tribal people in Australia). Tribal people in many countries
are not given equal freedom and rights like other citizens. Therefore, communitarian justice
will imply that these people are given some rights and liberties which may be political or
economic in nature.
6. Distributive Justice
Distributive justice is very critical for human society as a whole. The basic idea of distributive
justice is to treat equal people equally and unequal people unequally. Therefore, it can be
either vertical or horizontal in character. The principle of distributive justice upholds the view
that the benefits and burdens in a society must be distributed equally among its members.
However, there may arise a situation where the resources to be distributed are limited compared
to the number of persons sharing these resources. In such a case, certain principles need to be
followed like first-come-first-served, ladies first or the sick and disabled people may be given
more preference than a normal person.
The principles of justice are the principles of fairness. Justice is also regarded as a method or
system of ensuring equality to all who are equal and unequal. In Public Sector Economics, which
deals with public choice and the collective decision-making process, the issue of justice becomes
extremely important. Such public decisions may make some people worse off and some people
better off. Therefore, the principle of fairness assumes a significant role.
For the purpose of public choice, social welfare and reforms, what is important is the concept of
distributive justice which means the application of the principles of fairness in the distribution of
income and wealth in a society. However, the concept of fairness is often unfairly complicated
with various subjective interpretations. We have a number of theories of distributive justice, some
of which will be elaborated here.
 Theories of Ethics 51

THEORIES OF JUSTICE
We will start our discussion on theories of justice with utilitarian theory.

Utilitarian Theory
It considers any action which leads to the maximum benefits and happiness of the greatest number
of people in a society as a just action. For example, it is indeed very difficult to measure the concept
of utility because it is a subjective concept, similar to the concept of happiness. However, the
theory judges the rightness or wrongness of human action in terms of the principle of maximum
benefit or happiness. However, it does not take into account the impact of that action on minorities.
Therefore, this theory does not seem to be justified in many cases. The utilitarian theory takes into
consideration the well-being of most of the people but not all of them. It says that if the benefits are
more than the cost of an action, the action is justified. (A more detailed discussion on utilitarianism
is given previously.)

Egalitarian Theory of Justice

This theory is based on equality in the matter of distribution of burdens and benefits. This is an
important theory of distributive justice. The theory seems to give importance to absolute equality.
It does not take into account ability, efforts and need. Thus, according to this theory, the rich and
poor will get the same benefits and will make the same sacrifices. This theory has been criticized
on many grounds.
Criticism Against the Egalitarian Theory of Justice
Firstly, since human beings are not equal, it is said that the principle of equality is not a just
principle. Some people are more intelligent, more capable and educated than others. Therefore,
these people should be treated in accordance to their ability.
Secondly, it does not take into account the genuine need of people. Some people may need social
goods more than others because of large families or inadequate sources of income. The principle
of justice requires that these people should be given a bit more from the social stock of necessary
goods.
Thirdly, if all people are treated equally, there would be no incentive for the hardworking and intel-
ligent people to produce or achieve more.
Lastly, absolute equality is meaningless. What is more important is not absolute equality but
equality in terms of capability, need and resource endowment. Thus, a rich person should contribute
more and a poor person may contribute less or nothing to the national exchequer by way of taxation.
Thus, it is seen that the concept of equity is more meaningful than that of equality.
However, there is no denying the fact that every person must have equal political rights and
opportunities regarding rights and duties, and everybody must be ensured some basic minimum
standard of living.
52 Business Ethics and Corporate Governance

Capitalist Theory of Justice

The basic principle of Capitalist Theory of Justice is that everybody should receive the benefits
according to his contribution. Thus, a worker whose productivity is higher will get higher wages
than a labourer whose productivity is low. Capitalist justice favours inequality because inequality
leads to differential contribution. Thus, a person with more talent, experience and qualifications will
be able to contribute more to capitalist’s profits. It is based on the assumption that human beings are
essentially unequal. Therefore, justice wants inequality to be accepted as the basis of just reward.
It is sometimes problematic to measure the actual contribution of a factor of production. However,
the productivity of a factor of production can be measured by the market value of its marginal
productivity. There are many methods to calculate the value of marginal productivity of a factor
of production. In the case of services being produced by Government employees, it is difficult to
calculate objectively the marginal productivity of a worker who is working in the services sector
like education or hospitals. It is sometimes argued that a person who is working for a longer period
of time should be given higher wages compared to a person who is working for a shorter time. This
is not always a correct principle because longer duration of work does not automatically mean
higher productivity. It is the intensity of work which is more important than mere work efforts.

Criticism Against the Capitalist Theory of Justice

Firstly, a criticism that is often levelled against the capitalist theory of justice is that it does not take
into account the needs of the people and neglects the requirements of the people with less abilities
and opportunities. The principle of contribution does not consider the cases of socially disadvan-
taged or physically handicapped people.
Secondly, the practice of market valuation of productivity is itself incomplete or imperfect, as
market prices are often distorted by many factors.

Marxian Theory
Marx (1867) was of the view that only the establishment of communism could guarantee the need-
based wage payments to workers. Thus, communism to Marx is a just economic system. The
capitalist system cannot be reformed to bring justice to the labour class because under capitalism, all
institutions including the legal system, and the state are pro-capitalist instruments. Justice requires
that the wage system should be need-based. However, the question of the measurement of needs
will depend on the stage of economic development and also on the level of human development
that is aimed at. The needs should include not only the individual needs but also the social needs of
human beings. In spite of debates over the issue of needs, it has been accepted by almost all that the
needs must take into account a fair standard of living for the working class. Marx has remained very
critical of the capitalist idea of encouraging inequalities as the basis of principle of justice. Marx
has given a number of instances where he has proved that a capitalist system is basically unjust,
particularly to the working class. We will explain briefly these instances.
 Theories of Ethics 53

Surplus Value
A capitalist does not pay a labourer according to the productivity of his labour. The wages
under a capitalist system is always less than the productivity of labour. Every worker creates a
surplus value which is equal to the total productivity of labour minus the wage that is paid to
him. The positive difference between these two is called surplus value. This is pocketed by the
capitalists. Thus, a worker under a capitalist system is always exploited. The greater this surplus
value, the greater is the degree of exploitation.

Capital Accumulation
● Capitalism survives on the basis of capital accumulation which leads to centralization
of capital and concentration of capital. Concentration of capital is a process of capital
deepening where capital per worker is increased, or a particular technique of production is
made more capital-intensive. The taking over of weak enterprises or the merger of small
capitalists can be called the process of centralization of capital. The development of these
two forms of capital accumulation leads to the growth of monopoly capitalism. As a result
of centralization of capital, the bourgeoisie and small manufacturers are wiped out. Most of
them become proletarians. It has been pointed out by Lenin and others that monopoly is the
intensification of and not the negation of capitalism. In fact, monopoly capitalism grows out
of intense capitalist competition. The growth of capital accumulation hinders the interest of
the working class because this leads to more automation in the production process, resulting
in displacement of labour by machinery, and the result is the growth of the reserve army of
labour. A capitalist mode of production in the long run creates a pool of unemployed and
under-employed labour.
● The reserve army of labour created by capital accumulation leads to increase in poverty

among the labour class. Capital accumulation adds to the absolute deterioration of the
condition of the working class. The relative deterioration is called immiserization of the
proletariats. However, another condition, known as proliterianization of the working
class, is created when the workers are fully unemployed. The workers under capitalism not
only suffer from physical poverty including malnutrition, under-nutrition, and poor living
conditions but also from social poverty, implying discrepancy between wages, inequality in
consumption, inequality in opportunities and in resource endowments.
● According to Marx, a capitalist system is unjust because of many reasons including distrib-

utive injustice, lack of freedom and liberty and denial of human rights.
● Capitalism leads of alienation of workers. This alienation takes many forms such as alien-

ation from society, family, products made by workers, rights and freedom and from the self
also. In the context of alienation, capitalism cannot be said to be a just system.
Marx has elaborated how labour power is regarded as a commodity under capitalism. The
commodification of labour is totally unjust. Capitalism leads to de-humanization of labour power.
Marx was so disillusioned with system of capitalism that he believed the tradition of private property
system to be error ridden. The capitalist exploits labourers on the basis of the ownership of the
means of production and not because of his superior ability. Marx also has castigated the role of the
54 Business Ethics and Corporate Governance

Government by saying that the state is not neutral under capitalism; it always works in favour of the
capitalist class. Under such a situation, no justice can be expected from the state.

Criticism Against the Marxian Theory

The Marxian theory of justice has been subjected to several criticism. Briefly discussed here are a
few major criticisms.
Firstly, Marx’s prediction that economic conditions of workers under capitalism worsens, has not
been supported by historical evidence. They say that in a country like the United States, the relative
economic status of workers is gradually improving. This is, however, a polemical issue, and can be
settled only with more empirical evidence.
Secondly, Marx’s idea that workers should be given need-based wage, has not been accepted on
economic grounds. Critics point out that the payment of wages should be based on contribution.
Marx’s analysis that under capitalism workers are exploited is perhaps true in the sense that they
are paid lesser wages than the value of their marginal productivity. The surplus value is absorbed
by the capitalist.
Thirdly, Marx’s view that the free market is an unjust system because it generates inequalities
has been criticized by non-Marxists by saying that justice does not mean equality. It is also argued
that inequalities are essential to bring about more efficient allocation of resources. This is better
than the system of equality. The point is debatable. Better allocation of resources has nothing
to do with distributive justice. It has been accepted almost universally that a system of growing
inequality stands in the way of establishment of a just society. Inequality can be tolerated if it is in
favour of less fortunate members of the society (Rawlsian difference principle). However, this is
conspicuous by its absence in capitalism.
Lastly, it is pointed out by critics that the demise of the Soviet Union is proof that the Marxian
theory is unworkable in actual practice. However, it should be noted that the disintegration of the
former Soviet Union does not prove the end of Marxism. As a creed, Marxism will perhaps never
die and many of the basic tenets of Marxism are still true.

Socialist Theory of Justice

Socialism is based on the idea of equality of human rights, freedom and dignity. Socialism is
the first or the lower phase of communism. In this system, the ideal form of distribution will be:
“from each according to his ability and to each according to his needs”. Socialism stands for the
abolition of class conflicts, through the socialization of means of production. Socialist production
is based on the idea of maximum social welfare and justice. It tries to establish equality in the
sphere of production as far as possible. The class distinctions are gradually abolished and fully
obliterated during the higher phase of socialism (communism). There is no exploitation of one by
the other. The social properties are held by the state, the collective firms and co-operative societies.
Production is done by the people and for their maximum benefit. All people work collectively
and labour is socialized. The surplus product is utilized for the purpose of socio-economic devel-
opment. The institution of state is very essential under socialism. The State is the owner of the
 Theories of Ethics 55

means of production. It looks after the interest of the people by organizing production, distribution
and exchange. Under socialism, the state does not represent the interest of any particular class, but
it stands for the interest of all people.
Socialism promises to transform the society from the realm of necessities to the realm of
freedom and justice. It gives more emphasis on the ability of people to contribute to the social
stock of goods and services and the distribution is based on the needs of the people.

Criticism Against the Socialist Theory of Justice

Firstly, under socialism, there is no correspondence between the contribution of a worker and his
needs. In such a case, the remuneration is not based on contribution but on the needs of the people.
This practice cannot be said to be just in the sense that contribution has no relevance for fixing
wages.
Secondly, the needs of people are very ambiguous. There may be physical, social, present and
future needs. The needs may vary in quality too. What type of need is to be taken into account under
socialism is the question.
Thirdly, since remuneration depends on needs and not on the ability or contribution, there is no
incentive for the workers to increase his productivity. Thus, under socialism, it is likely that social
productivity will reduce.
Lastly, under socialism, individual freedom may be restricted because the occupations will not be
chosen by freewill. There may often be a conflict between the ability and the individual choice.
Since the distribution is based on needs and not on choice, ultimately the need will prevail and the
choice will be relegated to the background.

John Rawls’ Theory

John Rawls’ theory of justice (1971) has been regarded as a landmark that provides an alternative
to the theory of utilitarianism. Rawls complains that political theory in the past was sandwiched
between two dominant ideas: theory of utilitarianism and philosophy of intuitionism. Rawls was
not happy with either of these doctrines, and therefore, attempted to find a comprehensive political
theory that could rationally explain the structures of intuition and also explain satisfactorily the
principles that should govern distributive justice.
Rawls’ theory is based on the following three principles:
There should be equal liberty for all citizens with respect to essential fundamental rights
including human rights, freedom to own private property, freedom of speech, civil liberties, and
freedom of expression. These are the basic goods which are highly essential for any citizen to live
a meaningful life. These basic goods, according to Rawls, should be equally distributed.
There should be equality of opportunities for everybody so that the person can pursue his own
line of action or profession for the maximum capability expansion and growth.
Some amount of inequality is permitted to exist but there should be an attempt to improve the
economic conditions of the unfortunate people in the society (Difference Principle).
56 Business Ethics and Corporate Governance

A morally warranted situation for justice will have to be based on some neutral position at the
beginning, which Rawls refers to as the original position. In this original position, the parties (the
rational people) will choose those principles which they will apply to themselves. This is the same
as the Kantian moral ideas of reversibility. The original position should also be such that the
principles of justice chosen must be equally applicable to everyone. This is called the principle of
universalizability.
According to Rawls, social welfare is the welfare of the worst off members of a society. Rawls’
theory tries to answer two basic questions of distributive justice:
1. How can we find the principles of justice?,
2. What are these principles of justice?
The answer to the first question is that it is necessary to have a contact which is shielded under
the veil of ignorance. While answering the second question, Rawls rejects the importance of merit
because merit comes from heritage, upbringing and natural endowments that are irrelevant from
the moral point of view. All primary goods like liberty, opportunity, and so on are to be distributed
equally unless an unequal distribution is to the advantage of the least favoured. The difference
principle states that difference is allowed so long as they gain the least advantaged. In Rawls’ theory,
no person deserves to benefit exclusively from his talent; but it is not unfair to allow such benefits
when they work to the advantage of those who were less fortunate. This is precisely the essence
of Rawls’ principles. Under the difference principle, people only have a claim to a larger share of
resources if they can show that it benefits those who have lesser shares. However, in general, people
are not indifferent to the way the benefits produced by their collaboration is distributed, and there
may be a conflict of interests unless there is a set of principles. The importance of a set of principles
needed for the division of advantages among the participants is clearly recognized by Rawls when
he says:

A set of principles is required for choosing among the various social arrangements which
determine this division of advantages and for underwriting an agreement on the proper distrib-
utive shares. The principles are the principles of social justice: they provide a way of assigning
rights and duties in the basic institutions of society and they define the appropriate distribution
of the benefits and burden of social cooperation. A conception of social justice, then, is to be
regarded as providing in the first instance a standard whereby the distributive aspects of the
basic structure of society are to be assessed.
(Rawls, 1971, pp. 4–9)
According to Rawls, justice can be achieved on the basics of a hypothetical social contract
characterized by a situation so as to lead to the conception of justice. The point of the contract is to
determine principles of justice from the conception of equality. Rawls is interested in commutative
justice with an equal start and opportunity and fairness to everyone.
Given the position of contractarian equality among the members making the hypothetical
contract, justice would constitute a significant part of rational choice. Rawls advises to choose
a situation or strategy where in the worst situation, the payoff would be the largest among the
smallest (maximum) i.e. maximize the gain in the worst situation. However, for an unknown and
uncertain situation, Rawls suggests that people in the original position should choose the difference
principle.
 Theories of Ethics 57

People’s claim to social goods should not depend on natural endowments. Under the difference
principle, people only receive extra reward for their talents if that leads to the benefit of the less-well
off. Rawls defends the difference principle by saying that it counteracts the inequalities of natural
and social disadvantages. In his theory of justice individuals are expected to think about justice in
terms of the rules that should govern their self-interest without recognizing their talents, endow-
ments and social position.
Rawls presumes rational individuals would agree to two rather different principles—equality
in the assignment of basic rights and duties, and socio-economic inequalities are permitted only if
these result in compensating benefits for everyone. Rawl’s theory of justice makes use of distinctive
restatement and application of the social contract and rational choice theories. Rawls’ theory states
that the principles of justice are really the choice of rational people under the hypothetical situation
of equalized liberty, and under such a situation, justice can be regarded as the outcome of fair
agreement or bargain.
The parties making a contract or agreement for justice as fairness must be rational and mutually
disinterested. John Rawls interprets rationality in a narrow sense as the most effective means to
the given ends. The basic merit of the contract terminology, Rawls states, is that it conveys the idea
that principles of justice may be conceived as principles to be chosen by rational persons. Rawls
suggests that his principles of justice are superior for two reasons: (1) they spell out the idea of
fairness with clarity (2) they are the outcome of a hypothetical social contract.

Criticism Against Rawls’ Theory

1. The original position which is hypothetical in the case of his theory does not specifically say
anything about the principles of justice which are morally acceptable. The original position
may also suggest the importance of duty (Deontic Theory) or the theory of consequen-
tialism.
2. Rawls’ difference principle will not be accepted by all. Why should rich people sacrifice their
money and wealth for the betterment of poor people in a capitalist society? Many will argue
that the differences in wealth and income are the reflection of individual talent, intelligence
and ability, and such differences are natural.
3. The hypothetical social contract that becomes the basis of Rawls theory, is not practically
helpful for having a theory and principle of ideal justice.
4. Rationality has been defined too narrowly by Rawls as the most effective means to a given
end. He has not defined the nature of ends (just or otherwise) and the most effective means.
Effective means can be interpreted in terms of time or in terms of physical inputs or in terms
of cost. Each one of these will have different socio-economic implications.
However, in spite of these criticisms, it should be pointed out that Rawls has analysed some
important elements of justice by combining his notions on equality and inequality. Although he has
taken into account socio-economic inequalities, he has not failed to suggest some ways and means
to improve the living standards of downtrodden people.
58 Business Ethics and Corporate Governance

Libertarian Theory
The most important proponent of libertarian thinking is Robert Nozick (1974). According to him,
the transfer of income or wealth from the rich to the poor is unjust for many reasons. Nozick is an
anti-consequentialist. This means that it is not the outcome of any action that is important, but
it is the process that remains decisive. According to Nozick, only those processes are just where
exchange is voluntary.
According to Nozick, any justified distribution of benefits and burden will take into account
the free choice of the individual. If any action or policy is imposed on an individual in the matter
of exchange, it is not justifiable. A person’s choice has to be given full credit for creating a just
situation. The motto is—from each according to his choice and to each according to what he has
chosen. In other words, if a person has created something, he should be allowed to keep his own
creation, provided he wants it; it is not justifiable according to Nozick to take contribution from
one citizen to increase the welfare of another citizen. Such a type of distribution is not permitted by
the Nozick’s theory. Nozick also does not support the idea of infringement of individual freedom
by any authority. To Nozick, justice means freedom. So imposition of any rule or policy that curbs
the freedom of individual will be unjust. The only type of distribution which is justifiable is the one
which is based on the free choice of individuals. If something wrong has been done by the policy-
maker in the past, a way must be found to undo such things.
However, this is a very complicated task for the government and society. The libertarian view
says that the entitlement theory of justice should regard economic outcomes as just only when they
arise from acquisition by the state (or dispossession by the state) of what was not earned or what
was not voluntarily transferred. Just acquisitions in a sense are those that do not violate individual
rights and freedom, the distribution of income, therefore, must remedy these previous violations.
Nozick’s theory relies heavily on the concept of rights and freedom in the matter of property rights
and ownership. The present property rights are mostly found to be unjust. Therefore, the attempt to
redistribute such property is just. The concept of freedom developed by the libertarian thinkers is a
negative concept in the sense that it upholds non-interference with anybody’s freedom and rights.
The idea of Nozick has given rise to many debates about the concept of equity. It is indeed difficult
to know what is right and what is wrong.

Criticism Against Nozick’s Theory of Justice

Firstly, if a person has to depend on his creation, as Nozick observes, then most of the poor persons
in a society will remain poor forever, as most of them have inadequate resource endowment and
lower level of ability.
Secondly, Nozick does not favour the idea of income transfer from the rich to the poor. In such a case,
the level of socio-economic inequality will go on increasing. The theory is anti-progressive.
Thirdly, if some people’s lives can be saved by coercing others a bit, or distributing income from
the rich to the poor, the ultimate social or individual gain may be remarkable. However, Nozick’s
view is narrow and rigid.
Lastly, Nozick has given primary importance to freedom from coercion. What about other
forms of freedom? He is not concerned with basic human freedom like freedom from poverty
 Theories of Ethics 59

and unemployment, ignorance and starvation. These forms of freedom are equally important as the
freedom from coercion.

Quranic Theory
Justice is one of the most used words in the Quran (Koran). According to the Islamic system, it is
man’s responsibility to establish justice. Allah commands justice and welfare. The fundamental
principle that guided the social formation of Medina was the equality of men. The most honored
person in Islam is the one who is the most righteous. Justice is equated with what is socially good
for all. The Islamic concept of justice in the distribution of income and wealth does not require
reward for everyone irrespective of one’s contribution to society. Islam tolerates some inequalities
and allows differential earnings. Implicitly, the desirable pattern of income distribution is based
on the principle of equity. The quality determines the quantity. For instance, a man having two
wives need not buy the same length of cloth for each wife; since one may be shorter or slimmer
than the other. Islam advocates the provision of honorable living for the unfortunate who are unable
to participate in productive activities. It supports the program of basic needs (ma-ash) for every
family.
Social justice constitutes freedom, but with some constraints, as dictated by the religious prescrip-
tions. Social justice guarantees individual freedom against the misuse of power (Naqvi, 1981; 86).
The starting point of social justice is the equality of all before law. Social justice requires that the
poor be levelled up and the rich levelled down. Islam prohibits the concentration of wealth and
power in a few hands. The possessor of wealth in Islam is merely a trustee, who should spend the
wealth in such a way as will maximize social welfare. There is a built-in institutional mechanism
for the desirable pattern of redistribution of income through zakat (compulsory contribution for the
benefit of the have-nots). There is also a provision of sadaqah (occasional offerings) of alms to the
needy. The Islamic concept of justice is aimed at minimizing social inequalities through religious
prescriptions. As a matter of fact, true belief in Allah automatically entails devotion to justice and
righteousness.
The consequentialist philosophy envisages that a just action is that which is based on the
possible consequences of the action, policy or choice. Thus, it is the outcome of the action and
policy of choice. Thus, it is the outcome of the action that is important for the evaluation of any
public policy or choice. The utilitarian theory of justice is based on consequentialism. Under this
system, if consequences are good from the point of social welfare they are justified. If the conse-
quences are bad, the action cannot be considered as just.
The deontic philosophy is associated with Immanuel Kant. According to this philosophy, an
action is just if it is done as a duty. These duties or rules may be the rules of natural justice, moral
principle, codified rules or what may be categorical imperatives. The idea is similar to rule utili-
tarianism which states that social welfare or utility can be maximized by adhering to codified rules
or laws. New age utilitarians are deontological in their attitude. However, all the theories discussed
earlier are designed in a normative framework. It is necessary to integrate these theories of distrib-
utive justice to make them amenable to and a part of the mainstream economic theory that is still
dominated by the idea of Pareto Optimality.
60 Business Ethics and Corporate Governance

Gandhian Concept of Justice

Gandhi assigns a critical role to justice. Gandhi observes that justice for the individual is prime to
him and all else comes after that (Gandhi, September 17, 1919.). In Gandhi’s conceptualization,
justice constitutes natural universal justice and is based on rights. To him, justice is an uncondi-
tional claim to certain universal, natural, inherent and inalienable rights earned by duties. Duties
are preconditions of rights that are to be earned through proper performance of duties. Being influ-
enced by the theory of karma (action, as enshrined in Hindu religious scriptures, especially the
Gita), Gandhi placed much more significance on karma without any attachment and expectation
of rewards. Justice empowers a person to enjoy certain natural rights, such as equality of social
status, equal social and economic opportunities and equal enjoyment of freedom. Gandhi has talked
about at least six different types of justice (see Figure 3.1). These mainly relate to social justice,
pure justice, justice as natural rights in some situations, justice in the absence of duress, justice
as fair treatment, justice as a situation where no harm is done to an opponent in dispute, and the
Satanic concept of justice. He was deeply concerned about social and economic justice, which was
closely connected to his basic philosophy of non-violence. To Gandhi, justice is a prerequisite for
non-violence (Bhattacharya, 1969:395). These two Gandhian concepts are so interconnected that
neither could be understood without studying its relations with the other. It needs the Hegelian
concept of relations. One of the most important contributions of Hegel was his theory of relations,
which stated that nothing can really be understood in the true sense of the term without knowing its
relation to other related concepts or things. The same philosophy applies to the case of Gandhian
concepts of non-violence and justice.

Figure 3.1 Gandhian concept of justice

According to Gandhi, an action is just when it does not harm either party to a dispute (Gandhi,
1958–84, Vol.14:233). This idea of justice is the very heart of Gandhi’s satyagraha and conflict
resolution. To Gandhi, the simplest principle of justice depicts that situation where nobody should
be forced to do anything under duress (Gandhi, 1958–84, vol. 4:266). He has explained some
important principles of justice in connection with mill workers’ strikes in Ahmedabad in 1917.
His ideas are contained in various leaflets that he distributed to the workers and employers in his
bid to settle disputes. According to him, the cheating game of the employers towards the workers
was the Satanic notion of justice prevalent among the capitalists in the Western or modern world
 Theories of Ethics 61

(Gandhi, 1958–84, vol.4:233). The workers themselves also might have been influenced by the
Satanic concept of justice when they put forward a list of demands simply because they thought that
the union was strong enough to do so.
Speaking of the Satanic concept of justice, Gandhi writes:

In the present war in Europe…. no means is considered improper in defeating the enemy. Wars
must have been fought even in the past, but vast masses of people were not involved in them.
We would do well not to introduce into India this despicable idea of justice. When workers
make a demand merely because they think themselves strong enough to do so, regardless of
the employers’ condition, they will have succumbed to the modern, Satanic idea of justice…
you will never find in ancient India that a situation in which the workers starved was regarded
as the employers’ opportunity. That action alone is just which does not harm either party to
a dispute.
(Gandhi,1958-84, vol. 4: 233).

The Satanic concept of justice is wicked in nature and is motivated by revenge and selfish
personal gain. As against this auto-centric concept, there is the notion of pure justice which is
according to Gandhi is motivated by compassion, kindness and pity shown by the employer towards
the subordinate or dependent employees. Thus Gandhi writes:
There was a time in India when servants, passing from father to son, used to serve in the
same family for generations. They were regarded and treated as members of the family. They
suffered with the employers in their misfortunes and the latter shared the servants’ joys and
sorrows. In those days, India was reputed for a social order free from friction, and this order
endured for thousands of years on that basis. Even now this sense of fellow-feeling is not
altogether absent in our country. Where such an arrangement exists, there is hardly any need
for a third party or an arbitrator. Disputes between a master and a servant are settled amicably.
There is no room in this arrangement for increase or reduction in wages according as the
changing needs of the two might dictate.
(Gandhi, 1958-84,vol. 4: 232-233)
The Gandhian concept of pure justice is quite consistent with the Rawlsian difference principle,
which recommends a skewed distribution of income in favour of the poor and deprived sections
of a community. An example of a system of pure justice in India is to be found in the practice of
the jajmani system in ancient India to which Gandhi has alluded in various places in his writings.
Gandhi observes that in the past, the people of India had achieved great things because they made
pure justice the law of their life (Gandhi, 1958-84, vol. 16:316). In explaining the concept of pure
justice, Gandhi writes:
Pure justice is that which is inspired by fellow-feeling and compassion. We in India call it the
Eastern or the ancient way of justice. That way of justice which has no place in it for fellow-
feeling or compassion is known as Satanic, Western or modern justice.
(Gandhi, 1958-84, vol. 16:302–03)
62 Business Ethics and Corporate Governance

In Gandhis’ conceptualization, justice is basically tantamount to fair treatment (Gandhi, 1968,

vol.6:445). Justice must be laced with generosity and mercy. Gandhi observes: “Justice needs to
be tempered with generosity as much as generosity needs to be tempered with justice (Gandhi,
1958-84, vol. 88:259).
He was convinced that swaraj could never be achieved by usurping the rights of any community,
big or small, but by ensuring even-handed justice and fair treatment. Although the term fair
treatment admits various subjective connotations, it is not wrong to think that in the Gandhian
concept of justice, the term includes the basic idea of natural justice, equality and rights. He
lamented that British India was rife with injustice. To cite but one example, Gandhi said that he saw
almost daily courts in India denying justice and distorting the truth. In his words “…in the district
of Khurda, acknowledgements of enhancement of revenue are being forced from the people practi-
cally at point of the bayonet” (Gandhi, 1928, 12 June).

Appraisal of the Gandhian Concept of Justice

Gandhi’s concept of justice is a combination of two important philosophical theories—the Kantian
deontic philosophy and the philosophy of consequentialism. For Gandhi, to do one’s assigned
duty is a way to earn rights; he never became uncritical about the nature of duties. Only those
duties that are just, sanctioned by natural laws, and consistent with religious practices need to be
performed. These, then, are the categorical imperatives for him. The duties assigned by the higher
authority or by the state can very well be violated if these are immoral, unjust and repugnant to the
religiosity of men. Thus, Gandhi was not an uncompromising follower of deontic philosophy. He
was a discriminating consequentialist in the sense that he would like us to do only such work whose
consequences are ethical, morally upright and practically just. Thus, one can find an amicable and
no contradictory conflux of deonticism and consequentialism in Gandhi’s concept of justice.
Gandhi never subscribed fully to the utilitarian philosophy of the greatest good of the greatest
number. However, these two notions (Gandhian and utilitarian) of justice converge at many points
but there is no time when they part ways. A utilitarian, to be logical, will never sacrifice oneself,
whereas the greatest good of all. As a votary of non-violence and services to others, he was not
prepared to do any work that was not good for the society, nation and humankind.
The teachings of the Gita inspired Gandhi to do morally and socially just work without thinking
about the fruits of actions, which are to be decided by God. It is in the context of social justice
and equality that Gandhi considered the possession of wealth as something ethically unjust
(Gandhi, 1931, 23 Sept). Gandhi’s concept of social justice includes socio-economic equalities and
fair treatment, which can be attained through the non-violence means of satyagraha. As Gandhi
observes:

I have always held that social justice, even unto the least and lowliest, is impossible of
attainment by force. I have believed that it is possible by proper training of the lowliest by
non-violent means to secure the redress of the wrongs suffered by them.
(Gandhi, 1969:138)

The Gandhian theory of justice, if one can call it a theory, was an amalgam of all the theories
that have been elaborated upon earlier. His believed in the holistic notion of justice. His concept of
 Theories of Ethics 63

justice was quite similar to the utilitarian theory. To him, a just law or action is that which not only
maximizes the welfare of the greatest number of people but of all the people. He was not prepared
to accept that such actions were impossible in actual practice. However, he was not completely
a utilitarian because he did not support the idea of an individual behaviour that is based on the
principle of utility maximization without caring for the social welfare. One should not fail to note
here the principle of agency and structure, which is explained by Gandhi in terms of reciprocal
needs for interdependence. Gandhi supported the Marxian theory of justice in the sense that it is
based on the need for the absence of exploitation of the poor working class by the rich capitalist
class. Like Marx, he also believed that justice lies in the payment of need-based wages to the
working population. To Gandhi, justice is a relative term (Gandhi, 1935, 1 June).
Gandhi was Rawlsian in the sense that he was interested in commutative justice—justice with
an equal start, equal opportunities and equal fairness to all classes of people. Like Rawls, Gandhi
also had a soft spot for the poor and the so-called lesser mortals for whom he favored a little bit of
inequality and human kindness in the matter of distribution of resources.
Further, Gandhi did not agree with the libertarian view that the transfer of income and wealth
from the rich to the poor is unjust. In fact, on many occasions, Gandhi himself recommended such
transfers. However, he agreed with Nozick’s suggestion that it is the duty of the state to find some
mechanism to undo the wrongs done in the past. The implications of the Gandhian theory of justice
also support the libertarian view that just acquisitions must not disturb the rights and freedom of
individuals. Like the Islamic theory of justice, Gandhi’s concept of justice recognizes the equality
of all human beings and wants the possessor of wealth to be the trustee of the wealth for the
benefit of all. Gandhi also favoured the policy of leveling up the poor and leveling down the rich
for the sake of socio-economic equality. Gandhi has suggested basically a couple of methods for
combating injustice.

There are two ways of countering injustice. One way is to smash the head of the man who
perpetrates injustice and to get your own head smashed in the process. All strong people in
this world adopt this course. Everywhere wars are fought and millions of people are killed.
The consequence is not the progress of a nation but its decline. Soldiers returning from the
front have become so bereft of reason that they indulge in various anti-social activities. But
through the other method of combating injustice, we alone suffer the consequences of our
mistakes; and the other side is wholly spared. This other method is satyagraha. One who
resorts to it does not have to break another’s head: he may merely have his own head broken.
He has to be prepared to die himself suffering all the pain.
(Gandhi, 1916, 27 July)
The method of satyagraha as a means to achieve justice was first applied by Gandhi in South
Africa and then in India. The history of this struggle for all practical purposes became the history of
the remainder of Gandhi’s life in South Africa, and especially of his experiments with truth in that
subcontinent and in India (Gandhi, 1927:266).
64 Business Ethics and Corporate Governance

Summary
The discussion on “right” and “wrong” has been attempted by a number of theories. The Bible has
in this context given ten commandments—the most important of them are to love your neighbor
and to worship God with all heart, soul and mind. Aristotle has put more emphasis on human
virtues like benevolence, courage and kindness . He has advised to follow in every matter a golden
mean which is the mean between two extreme values. In his Nicomachean Ethics, Aristotle has put
forward the idea that character-building is essential for a happy and meaningful life; but character
is based on virtues.
Utilitarianism is based on the principle of greatest good of the greatest number, The theory of
consequentialism is an end-based theory: an action is good if the end result is good. Theory of
consequentialism is directly associated with teleological theory; it emphasizes telos (the ultimate
end). Kant emphasizes on the fact that no action is good or bad by itself; what matters is the
intention behind the act. He has put more emphasis on duties. He has proposed the principle of
universalism which is anti-consequentialist in nature. We should do only those acts which can be
universalized. According to Kant, categorical imperatives are ethical acts which must pass two
tests: Firstly, a person’s reasons for acting in a particular way should be the reason which should
induce others to act exactly in the same way (universalizability). Secondly, you should perform
your duty on others in such a way that you will like others to perform their duties on you in exactly
the same way (reversibility).
Nozick explains that the state must ensure that there is no restriction of freedom. To him,
individual is the end and not the means. The basic human rights must not be violated. According
to him, inequality is the natural principle and it should not be reduced, and it is improper for
anybody to distribute income of the rich among the poor people. The transfer of property or income
should be voluntary and not by coercion or any other means. Albert Carr’s theory of business ethics
considers bluffs in business as a permissible phenomenon. Is this fair? In any discourse on ethics,
the concept of justice is the most important. Justice is regarded as fairness. There are many types
of justice including retributive, communitarian, and compensatory, commutative, procedural and
distributive justice. The utilitarian theory of justice asserts that an action is just if it leads to the
greatest good of the greatest number of people. The egalitarian theory is based on equality. In the
capitalist theory of justice everybody should receive according to his contribution. However, the
Marxian theory asserts that wage should be need-based. This is possible only under communism.
This is also the view of the socialist theory. Rawls’ theory emphasizes on equality of opportunity
for everybody, and equal liberty for all citizens. However, he is in favour of the poor people and
advocates for the improvement of their economic conditions through difference principle.
The Quranic theory puts emphasis on equity, social welfare and righteousness. Some amount
of inequality is permitted, and it allows differential earnings. To Mahatma Gandhi, justice is based
on rights. It consists of absence of duress, claims to natural rights and no harm to anybody. He
advocated welfare of all. He also supported the Marxian theory by saying that wages should be
need-based. Like Rawls, he also stood for equal opportunities, equal fairness and equal rights and
also some favours for the poor people. He did not agree with the libertarian view that it is unjust
to distribute rich men’s wealth among the poor. Like the Quranic theory, he supported the idea of
levelling up the poor and levelling down the rich.
 Theories of Ethics 65

Key Terms
Hedonism Act Deontology Veil of Ignorance
Utilitarianism Enlightened Egoism Social Justice
W.D. Ross’s Seven rules Hedonism Libertarian View
Nichomachean Ethics Epicureanism Communitarian Justice
Golden Mean Principle of Universalism Contractarian Justice
Ten Commandments Categorical Imperatives Distributive Justice
Act Utilitarianism Justice Procedural Justice
Rule Utilitarianism Fairness Egalitarian Theory of Justice
Ordinal Measurement Retributive Justice Anti-Consequentialist
Cardinal Measurement Compensatory Justice Reverse Injustice
Telos Procedural Justice Jajmani System
Egoism Equity and Equality
Rule Deontology Difference Principle

Test Your Knowledge

1. State whether the following statements are True or False
(i) ‘Do not tell lies’ is a Christian Commandment.
(ii) Utilitarianism is based on the principle of cost and benefit.
(iii) A consequentialist theory is a teleological theory.
(iv) The Kantian theory of deonticism is based on the idea of performance of duties.
(v) Albert Carr’s theory suggests that it is perfectly right to bluff in business.
(vi) According to the Greek philosophy, the best life is the life of contemplation.
(vii) There are 15 Christian Commandments.
(viii) The theory of “golden mean” is associated with the name of Aristotle.
(ix) The concept of “categorical imperatives’ is associated with the name of Immanuel Kant.
(x) The capitalist theory of justice says that everybody should be paid according to his contri-
bution.
2. Fill in the blanks
(i) Retributive justice ensures some form of punishment to _____________.
(ii) Gandhi’s theory of justice advocates greatest good of _____________.
(iii) The difference principle is associated with the name of _____________.
(iv) The Nichomachean ethics is written by _____________.
(v) Libertarianism is associated with the name of _____________.
(vi) _____________ philosophy envisages that a just action is that which leads to good conse-
quences.
(vii) Robert Nozick says that it is _____________ to transfer income or wealth from the rich
to the poor.
(viii) The Kantian theory of justice is based on the ideas of reversibility and _____________.
(ix) Justice is equivalent to _____________.
(x) According to Karl Marx, _____________ leads to alienation of workers.
66 Business Ethics and Corporate Governance

3. Choose the correct option

(i) Socialism is based on the principle:
(a) From each according to his ability to each according to his needs
(b) From each according to his ability and to each according to his contribution
(c) From each according to his desire, to each according to his needs
(ii) Karl Marx shows that under capitalism, labour power becomes a
(a) Commodity
(b) Free good
(c) Basic good
(iii) Reserve army of labour signifies
(a) Unemployment
(b) Military power
(c) Young terrorists
(iv) Egalitarian theory of justice is based on the idea of
(a) Equality
(b) Inequality
(c) None of these
(v) Utility can be measured in
(a) Two ways
(b) Three ways
(c) Four ways
(vi) The teleological theory is basically concerned with
(a) End or consequences
(b) Morality
(c) Total costs and benefits
(vii) In Kant’s theory,
(a) It is the intention or motive that matters
(b) It is the actual action that matters
(c) Both action and motive matter
(viii) Rights are
(a) Empowerments or entitlements
(b) Liberties to do anything
(c) Powers to control
(ix) Surplus value is equal to
(a) The difference between the value of total product of labour and the wage paid
(b) Net profit
(c) Value which is unaccounted for
(x) Utilitarianism has been explained as the theory of
(a) Net benefit
(b) Net cost
(c) Benefit equal to cost
 Theories of Ethics 67

Review Questions
1. How will you distinguish between utilitarianism and consequentialism? Explain.
2. Make a reconciliatory approach between consequentialism and deonticism.
3. Explain the salient features of Aristotle’s golden mean.
4. What is a teleological theory? Analyse its various ramifications.
5. Discuss the Biblical assertion of the Ten Commandments of the Christian ethics. Which of the
commandments you think is the best?
6. Critically analyse W.D. Ross’ seven prima facie moral rules.
7. Why do our ethical decisions differ?
8. Explain why does a good man sometimes do ethically bad works?
9. Distinguish between the utilitarian and the consequentialist notions of justice.
10. Write an essay on Rawls’ theory of justice.
11. Compare and contrast the ideas of justice under capitalism and socialism.
12. Bring out the salient features of the Gandhian theory of justice.
13. Why is capitalism considered as an unjust system by Marx?
14. Which of the theories of justice that you have studied here appears to be most appealing to you
and why?
15. Compare and contrast the Gandhian concept of justice with the theories that you have
studied.

Web Links
1. http://jan.ucc.nau.edu/~dgs2/theories.pdf [Nine Theories of Ethics that Rule the World]
2. http://www.princeton.edu/~ppettit/papers/1974/A_Theory_of_Justice.pdf
[A Theory of Justice]
3. http://www.cupr.org/VI3/Storelli-VI3.pdf [John Rawls’ Principles of Justice]
4. http://www.tannerlectures.utah.edu/lectures/documents/Striker88.pdf
[Greek Ethics and Moral Theory]
5. http://www.bced.gov.bc.ca/irp/social_justice12/sj12irp2008.pdf [Social Justice]

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