Business goals are primarily geared towards attaining financial gains. Other factors weigh heavily in ensuring the success of a business undertaking such as the organizational capability, management competency and market improvement strategies. Beyond these success factors, however, one aspect of running a business that is crucial in determining the performance of the business in the long term is business ethics or the application of moral theories in making business decisions.
Business ethics refer to the adoption of proper business policies and practices concerning potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities. Business ethics are often guided by law, while others provide a basic framework that businesses may opt to follow in order to gain public acceptance. Business ethics are implemented in order to insure that a certain level of trust exists between consumers, investors and other stakeholders and various forms of market participants with businesses.
Moral theories provide guidelines that businesses can follow in the process of deciding whether an action is moral right or wrong in various situations. This essay discusses three moral theories, featuring the principles of each theory and presenting the strengths and weaknesses of these theories as applied to moral issues in business. These are the virtue theory, utilitarianism, and deontology .
Virtue ethics places emphasis on the role of a person's character and the virtues that can be used to evaluate ethical behavior. The work on virtue originated from the philosophical works of Greek Philosophers Plato and Aristotle.
This theory is a collection of normative philosophies that focuses on being rather than doing. Adherents of virtue ethics are presently in search of specific virtues that are ideal. There is an agreement among theorists that morality is the effect of intrinsic virtues. It boils down to “Character” versus “Person”. But how to define a Good Person? Is it one defined by Role Excellence? Are virtues the qualities that improve performance on a given task? For example, a good knife cuts well and good singer sings well. But there arises conflicts as when some excelled in "good" things (Mother Teresa, Gandhi and Martin Luther King) while others in heinous acts like Hitler, Stalin and Pol Pot. They all excelled BUT on entirely different matter. Those in the first group are not sans questionable deeds and views. The Nazis have a well developed theory of virtue, but not an ethics of virtue.
Plato asserted that right actions are performed by good people while Aristotle opposed saying that its right action that produces good people. But a deeper analysis will point out that both of them are correct but not all the time.
Virtue Ethics which expound on the person being good expected to do proper things augur well for business ethics as it will promote the welfare of the stakeholders in terms of reasonable returns to investments; good treatment of workers; and quality products/services for the customers. It guarantees order in workplace and market. Exploitative acts are not expected with good business officials and managers. It generates high performance of the partners. The propensity to make more revenues and profits in greedy fashion is minimized if those running the business are per se good.
Meanwhile, a weakness of this theory is the difficulty of establishing the nature of virtues. It varies from amongst culture and societies. Originally, Aristotle listed nine (9) virtues, that is, wisdom, prudence, justice, fortitude, courage, liberality, magnificence, magnanimity, and temperance. These have been reduced to four by modern day philosopher, namely, ambition/humility, love, courage and honesty. Another limitation of this theory is that it does not classify morally permissible or not actions. It focuses on qualities a person must have to be good.
An interesting point in virtue ethics is the importance of acting virtuously in an appropriate manner in various situations. Since virtue ethics dwell on the building of traits and character in a person’s life, it takes the process of education and training significantly, and emphasizes the importance of role models into our understanding of the virtue approach.
Utilitarianism, also known as “consequentialism” is a theory that originated from an English philosopher Jeremy Betham. who propounded that "the right or good thing is that which provides the greatest benefit to the greatest number of people." Later, the son of Betham's friend, John Stuart Mill, also an English philosopher, disagreed with some of the postulates of Betham of man being selfish by nature and will pursue acts which are favorable and beneficial to him. Mill argued that man has innate goodness too, is selfless and who will do good things for others. Mill pointed out that "you might act in your own self‐interest, but you also do nice things for others all the time." In other words, it is not the motive behind something but the outcome that counts in determining whether something is good or not. It is tantamount to the ends justifying the means. There are two ways to determine whether or not the end result is moral, viz: (1) the number of people helped versus harmed; and (2) the degree of benefit versus harm. Utilitarianism is the classical cost versus benefit approach to ethical decisions in business. The advocates of utilitarianism believe that the person using this approach focuses on the future effects of the possible courses of action and desires and acts to produce the most good. On the other hand, some of the weaknesses of this approach relate to assessing or calculating the consequences. It is difficult to measure the good results and degree of benefits of something. It is not easy to know all the good benefits/results of something in a given time resulting in misleading perception. The mix of good versus bad results in a given time may change later on. The results of something to one group may extend to another, etc. in a "rippling effect". It is difficult to designate a common unit of measure which may come to comparing oranges to apples. In addition, focusing on the outcomes of the action may lead to justifying a lie and breaking a promise and contract. It may also contravene the UN Declaration of Human Rights that states that a person's right to counsel, speedy and fair trial takes precedent over utility. In a utilitarian setting, consequentialism may be viewed as Act Utilitarianism(AU) or Rule Utilitarianism (RU). Under AU, "an act is right if and only if it maximizes utility." In RU, "an act is right if it accords with a body of rules the general adherence to which will maximize Utility." It would seem that RU will resolve some of the problems of AU wherein an act is good if it conforms to a rule which, if generally practiced will maximize happiness. Still, RU is not an improvement at all since it treats people as "mere means to Utility and calls it right!" John Stuart Mill says "our normal moral thinking can be justified through Utility." Thus, lying, cheating, non-respect of human rights and non-compliance with traffic lights are not allowed for they lead to or result in unhappiness. Utilitarianism helps enhance business ethics when the welfare and well being of the majority of the stakeholders like the investors, employees, and costumers/clients takes precedent. However, it is not totally good when the interest of the minority is totally ignored or jeopardized. The damage can be mitigated through relief and support. In this way, the best "win-win" approach is adopted and implemented. For example, a very effective asthma medicine benefits most patients who take it. A few, however, have side effects (acidic stomach) that can be cured by taking anti-acid medicine To give relief to the latter, the maker of the medicine gives coupon if the buyer text back the receipt and other information. Thus, it is the call of the buyer whether he/she will avail of the coupon. On the whole, the use of utilitarianism in business should spell out an ethical conduct where an action and/or appropriate combinations of actions will give best consequences.
"Deontology" is another moral theory that derives from the Greek "deon" meaning "obligation" or "duty", and "logos" or "study". It is an approach to ethics that centers on the rightness or wrongness of the actions themselves, and not the rightness or wrongness of the consequences of the actions (Consequentialism or Utilitarianism) or to the character of the actors (Virtue Theory). Deontology also known as “Kantianism” is associated mostly with Immanuel Kant who argued that the highest good was the good will, and morally right actions are those carried out with a sense of duty . Thus, Kant claimed that it is the intention behind an action rather than the consequences that makes that action good (Bowie, 2002). To be morally praiseworthy, one must do the right thing for the right reason. And, to be fully praiseworthy, an action must be both from the motive of duty and in accord with duty.
Kant’s dictum states that “Ought implies Can”. This means that if one is morally obliged to perform an action, then it must be possible for one to do it. This proposition disqualifies and rejects the virtue and consequential approaches to morality by focusing on the actions themselves.
Kantian moral philosophy is based on the notion of the categorical imperative, which is a universal ethical principle grounded on three formulations. The first formulation or the Universal law formulation states that “Act only on the maxim by which you can at the same time will that it should become a universal law”. This means that one should only act in accordance with rules that would hold for everyone. The second formulation or the Formula of Humanity states that “Act so that you treat humanity, whether in your person or that another, always as an end and never as a means only”. This dictates that human beings should be treated not simply as a means to one’s ends but also as ends in themselves. One should always respect the humanity in others. It follows that people in business relationships should not be used , coerced, or deceived, and the business organizations and practices should be arranged so that they contribute to the development of human rational and moral capacities (Bowie, 2002). The third formulation is “Act as you are, through your maxims, a legislating member of the kingdom of ends.” This rule requires that one should act as if he were a member of an ideal ”kingdom of ends”. In the organization, this means that the governing rules of an organization must be such that can be endorsed by every member in the organization. Moreover, from the Kantian point of view, the organization is seen as a moral community within which each member of the organization stands in a moral relationship with all others (Bowie, 2002).
Deontology is deemed meritorious in that it creates a system of rules that has consistent expectations of all people. Thus, if an action is ethically correct or a duty is required, it would apply to every person in a given situation. This encourages treating everyone with equal dignity and respect. The humanity formula of deontology is meaningful as it underscores that people are as important as the ends or goals we choose to strive for. On the other hand, universalizing contradictions is a drawback of deontology. For instance, securing a loan and falsely promising to repay the loan are self-defeating actions that would render securing loans, though a “right” action, as immoral.
Another criticism of Kantian deontology is the claim that only principles matter and consequences never matter. A question on moral absolutism also surfaces in the deontology belief that some actions are wrong no matter what consequences follow from them. For instance, Kant reject the “supposed right to lie from philanthropy”. Lies are never allowedeven to protect innocent people.
The Kantian deontology framework appears to be cold and impersonal, in that it may require actions which are known to produce harm, even though they are strictly adhere to a particular moral rule. It is argued that deontology provides mere guidelines and do not set priorities It also does not provide a way to determine which duty we should follow if we are presented with a situation in which two or more duties conflict. It can also be rigid in applying the notion of duty to everyone regardless of the personal situation. W.D. Ross, a pluralist deontologist later propounded on seven prima facie duties which need to be taken into consideration when deciding which duty should be acted upon.
Moral theories have rich implications for business ethics. The foregoing three moral theories are all useful in making ethical decisions especially in business. Not one is, however, perfect. There is no one best choice for application to the moral problems in business. Knowing their attributes, advantages and disadvantages helps in developing a framework for ethical decision making in business (A Framework). In evaluating decision-making options, some basic considerations are essential. Under the Virtue Approach one should determine which action leads one to act as the sort of person he/she should be. In the Utilitarian approach, the question is which action will produce the most good and do the least harm. And, using the deontology approach, one must ensure that the action will be in accord to his duty or obligation.
In formulating the framework of ethics in a business, another underlying concern that must be addressed is motivation. What drives the company is very important. A company may be motivated by an aim to produce the most good (Utilitarianism). It may also aim to perform the right action (Deontology) and it may also aim to develop a good character or image for the company (Virtue Theory). Such motivations are all good and also not mutually exclusive. As a holistic approach, one needs to put the frameworks together and come up with the appropriate conduct of ethics in the business. Good value judgment is the key to what moral principles a business will follow in its operation, be in the human resource aspects, corporate governance, fairness, customer welfare, corporate social responsibility, and in the whole gamut of ethical decisions.
Bowie, Norman.E. A Kantian Approach to business Ethics, Blackwell Publishing 2002.Web. 9 Feb. 2016.
“A Framework for Making Ethical Decisions”. Brown University. May 2013. Web. 9 Feb. 2016.