Chapter 2: Ethical Theories

Business Ethics
 Content
• Introduction: Ethical Theories
• 1: Utilitarianism
• 2: Kantian Ethics
• 3: Virtue Ethics
• 4: Rights
• 5: Justice
• Conclusion: Ethical Theories
 Learning Objectives (1 of 2)
• 1: Describe the four theses of classical utilitarianism, the
utilitarian approach to decision making, and the main criticisms
of the cost-benefit analysis method
• 2: Summarize the two intuitive principles of Kantian ethics and
their implications for moral reasoning
• 3: Define virtue and explain how virtues and principles of virtue
ethics are relevant to business
• 4: Identify the meaning and importance of rights and the types
of rights that apply in different situations

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 Learning Objectives (2 of 2)
• 5: Explain the role of justice in business ethics, the three kinds
of justice outlined by Aristotle, and the contemporary principles
of justice offered by Rawls and Nozick

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 Introduction: Ethical Theories
Types of ethical theories
• Teleological theories
• Deontological theories
• Virtue ethics

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Ethical Theories

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 Ethical Theories
• Teleological ethics - actions are ethical if they
produce good end results
• Example – utilitarianism
• Deontological ethics - an action is determined
ethical by its inherent nature
• Example – Kantian ethics
Ethical Theories
 1: Utilitarianism
Objective: Describe the four theses of classical utilitarianism, the utilitarian approach to decision making,
and the main criticisms of the cost-benefit analysis method

• 1.1: Principle of Utility

– Four theses of utilitarian principle
– Act- and rule-utilitarianism
– Calculating utility
• 1.2: Cost-Benefit Analysis
– Quantitative method for decision making
– Advantage of cost-benefit analysis
– Evaluation of cost-benefit analysis
– Assigning monetary values
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 1.1: Principle of Utility

Point 1 – Four theses of utilitarian principle

• Consequentialism
• Hedonism
• Maximalism
• Universalism
 1.1: Principle of Utility
Point 2 – Act- and-rule utilitarianism
• Act-utilitarianism
• Rule-utilitarianism
• An action is right if it gives pleasure over pain
• It should conform to a set of rules
 1.1: Principle of Utility
Point 3 – Calculating utility
• Pleasure cannot be measured in quantities
• Calculate pleasure for both ourselves and persons
affected by the action
• Make educated guess based on past experience
• Limit attention to a few significant features of the
situation
• Interpersonal comparison of utility
 1.2: Cost-Benefit Analysis
Point 1 – Quantitative method for decision making
• Measures pleasure in terms of monetary units
• Choose project with highest net benefit

Point 2 – Advantages of cost-benefit analysis

• Knowledge of people’s pleasure is eliminated
• Money is a common denominator for comparing
projects
• Availability of an analytical framework for
decision making
 1.2: Cost-Benefit Analysis
Point 3 – Evaluation of cost-benefit analysis
• All costs and benefits cannot be assigned monetary value
• Shadow pricing of nonmarket goods
• Assigning monetary value to life
• People’s individual and collective decisions are not always
rational

Point 4 – Assigning monetary values

• A few costs and benefits do not have a discernible
monetary value
• Placing monetary value might reduce the good’s alleged
value
 Table: Pros and Cons of Cost-Benefit
Analysis
Points Pros Cons

Consequences measured by monetary The market price or value of goods and Not all costs and benefits have a
value in a market services can be used to compare discernible market value or can be
outcomes. objectively valued.
Shadow pricing of nonmarket goods Market value can be estimated by Not all people are able to act or choose
analyzing the relative worth of choices in accordance with their preferences, or
suggested by actual behavior. make rational decisions.
Placing a value on human life and Can apply cost-benefit analysis to issues Seems cold-hearted and reductive; life,
experiences such as human health and safety love, happiness, etc. cannot be bought
and are cheapened by assigned values

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 2: Kantian Ethics
Objective: Summarize the two intuitive principles of Kantian ethics and their implications for moral
reasoning

2.1: Universalizability
– Categorical imperative (Yêu cầu- Mệnh lệnh)
– Implications for moral reasoning
2.2: Respect for Persons
– Features
– Respect people as human beings

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 2.1: Universalizability
Point 1 – Categorical imperative
• Act by rules
• No exceptions for yourself
• Moral judgments should be universalizable

Point 2 – Implications for moral reasoning

• Counters natural temptation to make exceptions for
ourselves
• Can be viewed as underlying the common question,
“What if everyone did that?”
 2.2: Respect for Persons

Point 1- Features
• Important element of ethical reasoning
• Serve as valuable additions to the utilitarian
approach

Point 2 – Respect people as human beings

• Do not treat people as means
• Respect one’s autonomy
 3: Virtue Ethics
Objective: Define virtue and explain how virtues and principles of virtue ethics are relevant to business

• 3.1: What Is Virtue?

– Aristotle’s idea about virtue
– Characteristics of virtuous people
• 3.2: Defending the Virtues
– Traits required for a good life
• 3.3: Virtue in Business
– Applying virtue ethics to business

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 3.1: What Is Virtue?

• Point 1 – Aristotle’s idea about virtue

• It is a character trait
• It is something we practice
• It is related to practical wisdom

• Point 2 - Characteristics of virtuous people

• Sense of fair treatment
• Ability to determine what constitutes fairness
 3.2: Defending the Virtues

Point 1- Traits required for good life

• Determine the character trait necessary for a
good life
• Give some content to the idea of good life
 3.3: Virtue in Business

• Point 1 – Applying virtue ethics to business

• Determine the goal of the business activity
• The contribution of the trait to achieve the
business goal
Table: Virtues and Vices in Business
Job Virtue Vice

Bank loan officer Prudence, Caution Charity

School guidance counselor Empathy, Enthusiasm Indifference

Personnel manager Resourcefulness, Impartiality Prejudice

Corporate executive Confidence, Focus Arrogance

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 4: Rights
Objective: Identify the meaning and importance of rights and the types of rights that apply in different
situations

• 4.1: Meaning of Rights

– Confusing claim of rights
– Understanding rights as entitlements
• 4.2: Kinds of Rights
– Different kinds of rights
– Natural rights theory by John Locke

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 5: Justice (1 of 2)
Objective: Explain the role of justice in business ethics, the three kinds of justice outlined by Aristotle,
and the contemporary principles of justice offered by Rawls and Nozick

• 5.1: Nature and Value of Justice

– Aristotle’s categorization of justice
• 5.2: Aristotle on Distributive Justice
– Aristotle’s principle of distributive justice
– Justifying features
• 5.3: Rawls's Egalitarian Theory
– Rawl’s principle on justice

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 5: Justice (2 of 2)
Objective: Explain the role of justice in business ethics, the three kinds of justice outlined by Aristotle,
and the contemporary principles of justice offered by Rawls and Nozick

• 5.4: Nozick's Entitlement Theory

– Difference between Rawls’s theory and Nozick’s
theory
– Main principles of Nozick’s theory

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 5.3: Rawls's Egalitarian Theory

Point 1 – Rawl’s principle on justice

• Equal share of basic liberties
• The social and economic inequalities should
benefit all
 Conclusion: Ethical Theories
• Main concepts and theories of ethics
• Useful in evaluating business activities
• Continue to be a source for improvement

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