BUSINESS ETHICS

-WEEK 3
By : Sanam Wasif
 Introduction

◦ Week 3 Agenda:

1. Understand different ethical frameworks.

2. Understand the ethical tradition of utilitarianism and its criticism.

 Introduction
Essential Readings :

 Chapter 2 : Business Ethics: Concepts & Cases by Manuel G. Velasquez, 7 th Edition, 2016,
Pearson Education

Further Readings :
Honest Work by Joanne B. Ciulla, Clancy Martin & Robert C. Solomon. Oxford University
Press, 2013.

Business Ethics: Decision making for Personal Integrity & Social Responsibility by Laura P.
Hartman, Joseph Desjardins and Chris MacDonald, (Third Edition), 2014
 Arguments Supporting Ethics in Business
◦ Ethics applies to all human activities

◦ Business cannot survive without ethics

◦ Ethics is consistent with profit seeking

◦ Prisoner’s dilemma argument

◦ Customers and employees care about ethics

 Arguments For and Against Business Ethics
Three Objections to Bringing Ethics into Business

◦ In a free market economy, the pursuit of profit will ensure maximum social benefit

◦ A manager’s most important obligation is to the company

◦ Business ethics is limited to obeying the law

Prisoner’s Dilemma
◦ A situation where two parties must choose to cooperate or not, and where both gain when both cooperate,
but if only one cooperates the other one gains even more, while if both do not cooperate both lose.
 Prisoner’s Dilemma
Prisoner B does not
Prisoner B cooperates with
cooperate with prisoner
prisoner A
A

Prisoner A cooperates A gets 1 year A gets 3 years

with prisoner B B gets 1 year B goes free

Prisoner A does not

A goes free A gets 2 years
cooperate with prisoner
B gets 3 years B gets 2 years
B
 Prisoner’s Dilemma

Useful Links :

◦ https://www.youtube.com/watch?v=NdITTDl5coE

◦ https://www.youtube.com/watch?v=t9Lo2fgxWHw

◦ https://www.youtube.com/watch?v=W8O131s31Rg
 Moral Responsibility & Blame
◦ In ethics, a person has moral responsibility when we say a person is to blame for something.

◦ People are not always responsible for the injuries they inflict on others.

A person is morally responsible for an injury or a wrong if:

1. The person caused or helped cause it, or failed to prevent it when he could and should
have; and

2. The person did so knowing what he or she was doing; and

3. The person did so of his own free will

 Moral Responsibility & Blame

A person is NOT morally responsible for an injury or a wrong if:

1. The person did not cause and could not prevent the injury or wrong, or

2. The person did not know he was inflicting the injury or the wrong, or

3. The person did not inflict the injury or the wrong of his own free will.
 Moral Responsibility & Blame

◦ Moral responsibility for a wrong or injury is mitigated by

(a) minimal involvement (although failure to act does not mitigate if one has specific duty to prevent the
wrong)

(b) uncertainty, and

(c) difficulty; but the extent to which these three factors lessen one’s responsibility depends on

(d) the seriousness of wrong or the injury: The greater the seriousness, the less the first three factors
mitigate.
 Ethical Frameworks

1. Utilitarianism: An ethical tradition that directs us to decide based on overall consequences of our acts.

2. Rights & Duties based framework: Directs us to act on certain moral principles such as respecting
human rights.

◦ Justice and Fairness: when one person accuses another of unjustly discriminating against him or her,
showing unjust favoritism toward someone else, or not shouldering a fair share of the burdens involved
in some cooperative venture
 1. Utilitarianism
◦ https://ethicsunwrapped.utexas.edu/glossary/utilitarianism
◦ Utilitarianism is the moral view that in any situation the right course of action is the one that will provide
people with the greatest amount of benefits while minimizing harms

◦ Actions and policies should be evaluated on the basis of the benefits and costs they will impose on society.

◦ That the morally right course of action in any situation is the one that, when compared to all other possible
actions, will produce the greatest balance of benefits over costs for everyone affected.

◦ Leading utilitarian theorists:

◦ Jeremy Bentham
◦ John Stuart Mill
 Utilitarianism

◦ The utilitarian principle holds that:

“An action is right from an ethical point of view, if and only if, the sum total of utilities produced by
that act is greater than the sum total of utilities produced by any other act the agent could have
performed in its place”

◦ that we can somehow measure and add together the quantities of benefits produced by an action and then
measure and subtract from those benefits the quantities of harm the action will produce
 Utilitarianism
◦ To determine the morally right action in any given situation, we must compare the utility of all of the
actions that one could carry out in that situation

◦ That one action whose utility is greatest by comparison to the utility of all the other alternatives

◦ Governments trying to determine the public projects to spend on, based on which will provide the
greatest benefits for the members of society at the least cost.

◦ Government policies are those that would have the greatest measurable utility for people—or, in the
words of a famous slogan coined by Bentham, those that will produce “the greatest good for the
greatest number.”
 Utilitarianism

◦ Utilitarian views have also been highly influential in economics

◦ Economic behaviour could be explained by assuming that human beings always attempt to maximize
their utility

◦ That the utilities of commodities can be measured by the prices people are willing to pay for them.

◦ Economists were able to derive the familiar supply and demand curves of sellers and buyers in markets
and explain why prices in a perfectly competitive market gravitate toward an equilibrium.
 Utilitarianism
◦ System of perfectly competitive markets would lead to a use of resources and price variations that would
enable consumers to maximize their utility

◦ Utilitarianism is also the basis of the techniques of economic cost-benefit analysis .

◦ This type of analysis is used to determine the desirability of investing money in a project (such as a dam,
factory, or public park) by figuring out whether its present and future economic benefits outweigh its
costs

◦ Utilitarianism leads to efficiency which is operating in the manner that produces the most from a given
amount of resources, or that produces a desired output with the lowest resource input.
 How to Apply Utilitarian Principles

◦ First, determine what alternative actions or policies are available to me in that situation.

◦ Second, for each alternative action, estimate the direct and indirect benefits and costs that the action will
probably produce for all persons affected.

◦ Third, for each action, subtract the costs from the benefits to determine the net utility of each action.

◦ Fourth, the action that produces the greatest sum total of utility must be chosen as the ethically
appropriate course of action.
 Challenge to Utilitarian Ethics
◦ One major problem is the difficulty of trying to measure utility.

◦ How can the utilities different actions have for different people be measured and compared as
utilitarianism requires?

◦ A second problem is that there are certain kinds of benefits and costs that seem impossible to measure.
For example, critics say, how can you measure the value of health or life?

◦ Yet another problem is that it is unclear exactly what should count as a benefit and what should count as
a cost.
 Challenge to Utilitarian Ethics
◦ Finally, the utilitarian assumption that all benefits are measurable implies that all benefits can be traded
for equivalents of each other

◦ For a given quantity of one good, there is some quantity of any other good that you should be willing to
trade for the first good
 Criticisms of Utilitarianism
Critics say not all values can be measured:

◦ Utilitarians respond that monetary or other commonsense measures can measure everything.

Critics say utilitarianism fails with rights and justice:

◦ Utilitarianism seems to ignore certain important aspects of ethics. Considerations of justice (which look
at how benefits and burdens are distributed among people) and rights (which look at individual
entitlements to freedom of choice and well-being) seem to be ignored by an analysis that looks only at
the costs and benefits of decisions.
 Criticisms of Utilitarianism
Critics say utilitarianism fails with rights and justice.

◦ Utilitarians respond to criticism with the theory of rule-utilitarianism (a form of utilitarianism that limits
utilitarian analysis to evaluations of moral rules) can deal with rights and justice.

◦ Two-principles of rule utilitarianism:

1. An actions is right from an ethical point of view if and only if the action would be required by
those moral rules that are correct.

2. A moral rule is correct if and only if the sum total of utilities produced if everyone were to follow
that rule is greater than the sum total of utilities produced if everyone were to follow some
alternative rule.