THEORIESOF BUSINESSETHICS

Introduction:
There are two types of ethical theories, namely,
 teleological theories
 deontological theories.

Teleological theories:
 The word teleological is derived from the Greek word 'TELOS' which
means an end.
 A great deal is depending on what is considered as good and what is
considered as evil.
 According to classical utilitarianism, pleasure is considered as ultimate
good.
 The human well being is considered as good.

Merits of teleological theories:

(i) It is based on ordinary moral reasoning.
(ii) It is justifying actions like lying, breaking a promise, stealing, and assault.
(Hi) It benefits in framing a public policy. Policy is concerned with end result.

Demerits of teleological theories:

(i) These theories are ignoring the means which are also as important as ends.
(ii) In a welfare state the means are considered as necessary steps for achieving the ends.

Deontological theories:
The word deontology derives from the Greek word 'DEON' which means duty.
In other words the deontological theories have given equal importance to the means as to
the end.
We have a duty and responsibility not to be bad.
For example, corruption is wrong.
The British philosopher W. D. Rosshas introduced a system consisting of seven rules.
These rules put together are called Ross's system which is listed below.

Ross's system of duties is an example of deontological theory:

(1) Duties of fidelity to keep promises and tell the truth.
(2) Duties of reparation to compensate people for injuries.
(3) Duties of gratitude to return favours those others do for us.
(4) Duties of justice in the sense goods are distributed according to the merits and nature
of people.
(5) Duties of beneficence to improve the conditions of others.
(6) Duties of self improvement such as improving virtue and intelligence.
(7) Duties to avoid injury to others.

Deontology is the science of duty. We should not be bad in our duty.

Ideas of Confucius:
The ideas of Chinese philosopher Confucius are an example of deontological theory.
The major ideas of Confucius are given below:
(a) What you do not wish done to yourself, do not do to others.
(b) Do not wish for quick results, nor look for small advantages. If you see quick results,
it is difficult to attain the ultimate goal.
(c) When you see someone of worth, think of how you may emulate. When you see
someone unworthy, examine your own character.
(d) Wealth and rank are what people desire, but unless they are obtained in the right way
they may not be possessed.
(e) Feel kindly towards everyone, but be intimate only with the virtuous.

Merits of deontological theories:

(a) The ends are the ultimate objects. The achievement of ends means the success of any
business.
(b) It is based on the psychological aspects of motivation.
(c) Ultimate end can result in quick actions.

Demerits of deontological theories:

(a) The means should justify the end. Hence the means should be based on ethical values.
(b) It is difficult to follow deontological rules in real life. Ross's rules cannot be practiced
in real world.
(c) The deontological theories can operate only in a theoretical world. But the world is
giving much of importance for the material welfare and progress, ignoring the human
values.

The doctrine of the mean of Aristotle:

Aristotle has a set of moral values which are universal and everlasting. Courage, self-
control, generosity, high minded ness, gentleness, friendliness, truthfulness, wittiness,
and modesty are the human and moral values suggested by Aristotle. All these qualities
are essential for a good manager with a human face. These qualities can make a manager
to function as effectively as possible. These moral qualities help the manager to get
effective team and achieve the desired goals.

Virtue ethics:
Aristotle is a pioneer of virtue ethics.
A virtue is a positive quality like patience, hard work and justice.
A good number of virtues are to be developed by business people.
A virtue ethics is primarily considering the character, motivations and intentions of
business people.
Virtue ethics reflects the excellence of human character.
One's character can be assessed in terms of principles followed in life like honesty,
justice, and labour.
It can be estimated in terms of following the professional ethics.
It can also be assessed in terms of the effects of following a virtue ethics.

The concept of character in virtue ethics can be defined by the community where the
individual isliving or operating.
Virtue ethics is useful in determining the ethics of an individual with reference to
his society and profession. For example, a virtuous auditor has to follow the code of
professional ethics.
Virtue ethics encourages a deontological approach by looking into the right aspect in
each and every situation.
Every community and profession has its own code of conduct. There cannot be a best
approach in any given situation. But a legal and ethical situation can be found out by
using virtue ethics.
Individual ethics and social ethics can go hand in hand. Individual ethics can be called
micro ethics and social ethics as macro ethics.
Virtue is a source of practical wisdom. For example love, courage, benevolence and
honesty make customers, employees, suppliers and competitors happy and enable to
provide co-operation.
The virtue ethics approach allows the decision maker to depend on the relevant
community standards without going through the process of using deontological or
consequentialist approaches.

The virtue ethics is honouring the existing social thinking.

Individuals are connected in a business and people should learn from business practices.
According to Aristotle knowledge cannot be separated from action. He also believed that
ethics is not an exact science and not conducive to mathematical formulation and
demonstration.
Application of virtue ethics:
(1) Trust-_ctonfidence in the behaviour of stakeholders.
(2) Self control - control of oneself from taking immediate benefits - only concerned with
longterm benefits.
(3) Empathy - sharing the feelings of others.
(4) Fairness - equitable dealing with others.
(5) Learning - constant acquiring of knowledge of business.
(6) Gratitude - a sign of maturity, civility and decency.
(7) Moral leadership - attainment of peace of mind, contented heart and happiness.

Estimate of Aristotle's ethical theory

Merits:
(i) The set of moral values suggested by Aristotle is universal and suitable for all times.
(ii) The concept of virtue ethics is very much suitable at a time when convergence is
taking place at the global level.
Demerits:
(i) In the modern real world situation, the ideas of Aristotle are not followed. This is
because of fall in the values of the society.
(ii) There are conflicts between individual ethics and social ethics.
(Hi) The excellence of human character is not very much appreciated. A significant part
of the society is corrupt.

Conventional ethics of Albert Z. Carr

Albert Carr wrote an article "Is Business Bluffing Ethical?" in which he asserts that
bluffing in business may be ethical. Bluffing in business is considered as a game strategy.
In some situations, bluffing is more acceptable. Carr is quoting the British statesman
Henry Taylor who said, "Falsehood ceases to be falsehood when it is understood on all
sides that truth is not expected to be spoken". Carr has made a distinction between
business ethics and religious ethics. Loyalty to customers and fair to suppliers will do for
business. He speaks about the company for which he was the president "we are loyal to
our customers and fair to our suppliers. I regard my handshake on a deal as a contract. I
have never entered into price fixing schemes with my competitors. I have never allowed
my salesmen to spread injurious rumours about other companies. Our union contract is
the best in our industry. And, if I do say so myself, our ethical standards are of the
highest".
Many business people are ethical in private lives and not in business.
Industrial espionage is not considered unethical.
Many companies make use of concealed cameras and microphones or by bribing
employees.
These companies do not set up research and design departments of their own. These are
all unethical practices.
Industrial espionage is not considered unethical. These unethical practices are cheaper
compared to setting up of a research department.
The best example for this industrial espionage is electronics industry.

A CEO made a comment:

"If ethics cannot be embodied in the law of the land, you cannot expect the business to
fill the blank".
The violation of ethics takes place in all areas of human operations. In 1967, a key
manufacturer was accused of providing master keys for automobiles to a few automobile
thieves.
The old John D. Rockfeller told in a Sunday School, "God gave me my money".
Everybody knows that business prosperity and departure from business ethics are highly
related to each other.

Ends- means ethics of Machiavelli:

Machiavelli was the defence minister of Italy. He wrote a famous book called 'Prince'. He
mentioned common virtues like moderation, clemency, charity, gentleness, vigour and
devotion. But felt that these virtues are not necessary for the real world.
Machiavellianism is a personality trait associated with a manipulative and unethical
leadership style. The ethical problems have to be perceived and
solutions have also to be perceived.
According to this theory, a leader should be energetic, bold and shrewdness. He believed
in divorcing ethics from politics. "A weak Christian makes a better President than a
strong one".
(Machiavelli)
A political agent can be excused for performing unethical acts. To manage any army,
harshness and cruelty are necessary. This theory suggests that it is better to take a side
than be neutral. It stresses that dignity is the most important quality.
It examines that under certain situations, one has to be more and more of realistic.
Might - Equals Right Approach of Karl Marx
Karl Marx believed that the growth of the society in terms of various stages like feudal,
industrial, state intervention, and ultimately a socialistic society.
Karl Marx believed that history is a record of struggle between haves (bourgeois) and
have nots (proletariat). This results in the historical events.
The surplus value is created and developed by Karl Marx based on some wrong
assumptions prevailed at his times. The workers are not paid according to the duration of
their work. They are paid lesser and this is called exploitation of labour by the owners of
industries.
In real life these things are not happening. Moreover labour legislation has become a
popular practice in all countries. But credit goes to Karl Marx for creating an awareness
in the minds of workers about their rights.

The Art of War Theorv bv Sun Tzu

Sun Tzu wrote a book called "Art of War". He has compared business to war. He has also
given the following ideas related to business ethics.
(a) Whether we live or die depends on the configuration of the battlefield. Whether we
survive or perish depends on the way of battle. Any business has to be careful in its
business strategies.
(b) In the war we should know the way, the weather, the terrain, the leadership, and
discipline.
In business also we should know the way, the business conditions, the nature of
competition, prevailing business leadership and business discipline.
(c) As in war in business also we have to find out who is superior in all these things,
whether ourselves or our competitors. Then only we can mobilize our business forces.
(d) The business should empower team of the businessman to understand the strategy and
the way. Then only he can take the team with him.
(e) If people are treated with benevolence, faithfulness and justice they will be happy and
offer full co-operation. A business leader should also be kind to both the employees and
customers.
(f) An army general should be a good planner using his talents and intelligence. He will
employ different types of people, such as intelligent, brave, greedy, and foolish people.
Intelligent will show their merits, brave are ambitious, the greedy welcome an
opportunity to pursue profit and the fools do not care if they die. Similarly a good
business organisation should have people with different capabilities to follow the various
business activities and operations.
(g) An army cannot act without knowing the strategies and conditions of opponents.

Similarly in a world of "brand wars", each competitor should know the present strategies
of the otherplayers.

Immanuel Kant's categorical imperative:

Immanuel was a well disciplined Prussian with deep analysis and thinking. Though he
did not travel much, he was able to understand the ethical implications of life which can
be very well applied to business. His approach is also deontological giving importance to
means and methods.
Kant wrote a famous book called Foundations of the Metaphysics of Morals. He says that
reason should bring moral obligations.
The phrase 'categorical imperative' refers to the dos and don'ts in business and life.
Kant has suggested the ethics of duty in terms of which every person has two types of
duties, namely, internal duty and external duty. The internal duty refers to think with
morals and external duty is to act with moral principles. He has pointed out that emotion
cannot go with moral.

Kant has given three fundamental criteria of categorical imperative:

(a) Universalizabilitv:
If an act is right for one person, it is right for all others.
(b) Respect:
We have to give a self respect to ourselves and respect others. The goodness has to be
legalized.
(c) Publicitv:
We have to openly acknowledge good acts of people.

Human beings should use rationality and reasoning. The rights of individuals have to be
given importance. The positive rights have to be recognised.
Kant suggested that business is an opportunity to live well and get along with others.

Criticism of Kant:
(1) Many people are not rational in their behaviour.
(2) Rights are not available to all people at all times.
(3) In the modern world, the concept of virtue is fast diminishing. The bad concepts of
black money, corruption, bribery and other unethical practices have become accepted
practices.
One minute moralist theorv of Robert Soloman
This is a deontological theory justifying the means to reach the ends. Robert Soloman
puts the questions to businessmen:
i) Does ethics in business lead to profits?
ii) Is good ethics good for business?
Even in a cut throat competition ethical ideas can be practiced. It is not the question of
preaching ethics but practicing ethics.
Ethics is a way of life. Ethics is the art of mutually agreeable tentative compromise.
Ethics should not be super imposed on business. A good business should be defined by
ethics and practiced by ethical standards.
Every society at each stage should reexamine ideas about business. It is hypocrisy to
believe that business is a tough minded moral struggle for survival and profits rather than
an established ethical enterprise.
This theory concluded that nothing is more ethical than good business.

Utilitarian ethics of John Stuart Mill

John Stuart Mill was a man of extraordinary learning. He was a combination of
philosophy, logic and economics.
He has given importance to the concept of utility which means the ability to satisfy a
human want.
Mill has pointed out that happiness brings pleasure and unhappiness brings pain.
Business should promote happiness to the customers.
Human beings alone are capable of enjoying the pleasure including arts and intellectual
pursuits.
An action is right if it produces the greatest benefits over the pain to everyone.

There are four phases of utilitarian principles:

(a) ConseQuentialism:
Every action has some efforts. Right actions produce right effects. Business should be
capable of producing good results.
(b) Hedonism:
Hedonism refers to pleasure which should bring happiness to all. Business should
promote pleasure to buyers, employees and all the stakeholders.
(c) Maximalism:
A good business should bring about maximum benefits to all. The buyers should get the
maximum benefits and the sellers should set at a reasonably high price to cover up costs
and earn profit.
(d) Universalism:
What is applicable to one country should be applicable to other countries also. This
concept is very much relevant to the modern days of globalisation.

Criticism:
(1) It is difficult to measure utility. Money cannot be the measuring rod of utility.
(2) In any business, cost-benefit analysis cannot be applied on all occasions. During
scarcity prices go up and during abundance prices are normal.

Comparison of Kantianism (Kant) and Utilitarianism (Mill)

Kantianism (Kant) Utilitarianism (Mill)
1) Universal 1) Selfish
2) Good in themselves 2) Means to an end
3) Strong flexibility 3) Weak in flexibility
4) No lying 4) Lying to some extent
5) Ethics of duty 5) Ethics of welfare
6) Deontological 6) Teleological
7) Encourages common good 7) No encouragement of common good

Summary
1) There are two types of ethical theories, namely, deontological and teleological
theories. Deontological theories give importance to both means and ends. Teleological
theories give importance only to the ends and not to the means.
2) Deontological theories:
./ Ideas of W. D. Ross
./ Ideas of Confucius
./ Virtue ethics of Aristotle
./ Immanuel Kant's theory
./ Theory of Robert Soloman
3) Teleological theories:
./ Ideas of Albert Carr
./ Theory of Machiavelli
./ Marxian theory
./ Sun Tzu's theory
./ J. S. Mill's theory of Utilitarianism

Questions
Section 'A'
1) What is a teleological theory?
2) Define deontology.
3) What are the ideas of Confucius on business ethics?
4) Define virtue ethics.
5) Explain the conventional ethics of Albert Z. Carr.
Section 'B'
1) Describe the ends-means ethics of Machiavelli.
2) Explain might equals right approach of Karl Marx.
3) How business can be compared to the art of war?
4) Describe the idea of one minute moralist of Robert Soloman.
Section 'c'
1) Examine the categorical imperative approach of Immanuel Kant.
2) Discussthe utilitarian ethics of John Stuart Mill.