eiv mod 4 ethical theories

Ethics & Values in Management

Module 4: Ethical Theories

EIV Mod 3 Ethical Theories1

Why study ethical theories?

• One needs to study the language & concepts of economics and management to make good decisions– Consumer surplus

• The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than they would be willing to pay

– So also, one needs to be aware of key theories and concepts of ethics to make sound ethical decisions


Two main schools of thought

• Teleological theories• Telos (Gr):End• Logos: Discourse

– Determine the ethics of an act by the probable consequences of the action (the ends)• “Go-getter”

• Deontological theories– Determines the ethics by looking at the process (the means)

independent of the consequences– Ethics as a matter of principle, duty, justice and fairness

• Infosys would not pay any bribe• Neither would Tata pay a ransom


Teleological Theories

• The most representative of teleological theories is the Utilitarian Theory also called the Consequentialism– Read “Utilitarianinsm” by John Stuart Mill – Ethical act is one that which is expected to result in greatest “good”

(“Utility”) for the greatest numbers• Bahu Jana Hitaya, Bahu Jana Sukhaya• Example: Hydropower plant

• The other theory is the Distributive Justice– Read “Distributive Justice” by John Rawls – Concept of fairness– Equitable distribution of goods & services– Often, the fairest result is the one that is unequal


Utilitarianism

• Utilitarianism or Consequentialism– Determining in terms of consequences

• Not only to ourselves but also for all the parties affected by the action

• Stakeholder Approach

– Does “High” CEO pay result in a better social consequence?

– If yes, it is justified


Utilitarianism

• Utilitarian thinkers• Roots of utilitarian thinking

– Thomas Hobbes (1588-1679)– David Hume (1711-1776)– Adam Smith (1723 – 1790)

• Classic formulations – Jeremy Bentham (1748 – 1832)– John Stuart Mill (1806 – 1873)

• Read “Utilitarianism” by John Stuart MillEIV Mod 3 Ethical Theories

6

Utilitarianism• In understanding, “good” or “utility”, which is

central to Utilitarianism, following concepts will help• Intrinsic value

– That which can be valued for itself– Happiness is the ultimate good

• Instrumental value– Money per se does not give happiness, it is only

instrumental in buying goods and services that bring in happiness

– Lest you may mistake, money is important but only as an instrumental value in obtaining intrinsic values


What is Happiness?

• Experiencing pleasure & avoidance of pain, according to Bentham, is happiness– Nature has placed mankind under the

governance of two sovereign masters, pain and pleasure


Problems of measurement• If both you and I like to get a job

– Can you get under the skin of each and know the utility?

• Some benefits and costs are intractable to measurement– How do you value life to be $ 200000 as in Ford’s Pinto car case

• Difficulty in predicting future costs and benefits– Could one have predicted the benefit and cost of Einstein’s

research E = mc2

• What counts as benefit and what counts as cost?– Is setting up a liquor shop a cost or a benefit?

• How do you utility of noneconomic goods?


Problems of measurement• Noneconomic goods

– Goods, such as Happiness, life, love, freedom, equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of noneconomic good• “Amulya”, “Invaluable”

• GNH (Gross National Happiness) vs GDP– The term coined in 1972 by Bhutan's former

King Jigme Singye Wangchuck


Problems of measurement

• Problems of measurement• Different people have different experience

with the same utility• Whose happiness measures most?

– “Everybody to count for one, Nobody for more than one”

• Bentham


Problems of measurement

• If an action renders one exquisitely happy and three moderately unhappy, does the happiness of that one outweigh the unhappiness of the three?


Critique of Utilitarainism

• One major criticism of consequentialism :• You may intend to have certain consequence

– But there can be unintended consequences


Critique of Utilitarianism

• Does one consider the good of the animals?• See Video the “To drill or not to drill?” and read the

case “Gas or Grouse?”• Does a contended sheep count the same as

contended philosopher?


Problems with Rights & Justice

• Utilitarianism runs into difficulties with Rights & Justice

• What are Rights?– Individuals entitlements to freedom of choice

and well-being


Problems with Rights

• Read and answer the case on “To kill or not to kill your uncle”

• By killing your uncle, are you not interfering with his right to live, even if suffering?

• Right to life is a fundamental right


Problems with Rights

• Consider the Ford case of Pinto cars on page 60-61 of Business Ethics by Manuel Velasquez

• As Ford decided by cost-benefit analysis that the society has to pay $ 137 million for a prevention loss of $ 49.15 million, and hence decided to waive the modification in the gas chamber, – Do the customers have the right to know that they are

riding a car with a certain amount of risk?


Problems with Rights & Justice• What is justice?

– Distributing benefits and burdens fairly among people• Distributive Justice: How the burdens and benefits

are shared in the society - John Rawls• Retributive Justice: Assignment of merited rewards

and punishments• Compensatory justice: Making up for losses

suffered• Caring justice: From compassion to near and dear


Problem with Justice

• By not changing Pinto’s design, the Ford managers’ were in effect forcing 180 (who may die) to absorb all the costs

• Is it just to have 180 people absorb all the cost or distribute the costs among all buyers?

• Which is the fairest way of distributing the costs?


Ethics of care

• Read the case “To pay or not to pay”, the case of the Ship Builder.– Applying ethical standards when survival is at

stake– Don’t take such decisions alone, buy time– Apply the ethics of care– Apply the ethics of utilitarianism– Is there an alternate way out?


Deontological ethics

• Deontological theories– Universalism– Divine Command (Religion)– Virtue ethics


Universalism

• Tradition of the German Philosopher Immanuel Kant (1724-1804)

• Why is it termed Universalism?– Universalism suggests that in

reaching a decision, consider if the decision would be acceptable if everyone, in every situation, made the same decision


Universalism

• Suppose you are advertising a falsehood regarding your product in order to increase the sales– Forgot for a moment that your competitors are also doing

likewise!• Does it pass the test of universalism?• To determine, ask a question regarding another product that

you use:– “Would I have liked false advertisement about a product used by

me?”– The answer of the conscience is a clear “No”

• Therefore, false advertisement fails the test of universalismEIV Mod 3 Ethical Theories

Universalism

• Universalism• Read “Grounding for the Metaphysics of

Morals” by Immanuel Kant• Ethical duty explained by the principle of

Categorical Imperative– Imperative is a command or duty – Categorical means without exception

EIV Mod 3 Ethical Theories

Universalism

• For example,• Kant would oppose child labour on the grounds that

every child has a right to education, protection and others have duties towards children

• Thus, even though it may be economically beneficial, it would be ethically incorrect to practice child labour as per deontological school of ethics– Would a Utilitarian philosopher also believe the same

way?


Difficulties with Kant’s views

• “Golden Rule 1” – “Do unto others what you want others to do to

you”

• One weakness of the Golden Rule is that it could be circular:– If everybody in a “society” is a crook, it would

be ethical to cheat in a land of cheats– Transparency International rating of India


Difficulties with Kant’s views

• Golden Rule 2• “Though shall not lie”

– Classic case of a mad axe-man asking as to where your children are sleeping?• Should the mother lie?

– A plane in distress• Pilot’s announcement “There is no danger” may be

literally false but puts passengers in a better frame of mind

• And is said in service of a higher truthEIV Mod 3 Ethical Theories

27

Difficulties with Kant’s views• I & you would say

– White lies in such cases are all right• But not Kant!• He has grasped the nettle• Kant’s handling of “Kante”

– Handled difficult problem• Central to moral scheme of Kant is prohibition to lying is simple

and absolute– No exception!

• And the reaction of the mother facing axe-man would be• “To heck with that. If that’s what morality demands, then I am

opting out”EIV Mod 3 Ethical Theories

28

Divine command

• Perspective of religion• The authority of Vedas or the Bible or the Quran

– “Though shall not kill”• Why?

– Ten commandments say so..

• The religious point of view is no different from Kant except that the universal principles come directly from religious beliefs rather than elsewhere


Divine Command

• Class presentation• Three teams to highlight the ethical

treatment from the various religions– 15 minutes for each team


Virtue ethics

• The key to good ethics lies not in rules, rights or responsibilities but in the classic notion of character

• Plato (see picture) and Aristotle encourage character traits such as honesty, fairness, compassion and generosity


Case of the ship-builder

• Read the given case• What should the protagonist of the case,

Andrew Marshal, do?• Apply Teleological theories and

Deontological theories in resolving the dilemma

• What would you do if you were in a similar situation?


Summary of module

• Studying key theories & concepts of ethics helps in appreciation of ethics and provide a framework for resolving ethical dilemmas

• Teleological & Deontological theories are the two main schools of thoughts– Teleological theories determine whether an act is

ethical or otherwise by the probable end results– Deontological theories are concerned with the

meansEIV Mod 3 Ethical Theories

33

Summary of module

• Utilitarianism and Distributive are two main teleological theories– Utilitarianism is concerned with “greatest good

(“Utility”) for the greatest numbers”• Not only to ourselves but also for all the parties affected

by the action• Stakeholder Approach

– Distributive justice is concerned with a system that ensures equitable distribution of goods & services


Summary of module

• Utilitarianism or consequentialism is by far the most popular of the theories but has its pitfalls– Unintended consequences– Can the good of majority take away the rights

of the minority?


Summary of module

• The deontological theories are Universalism, Divine Command (Religion), Virtue ethics– Universalism requires that in reaching a decision,

consider if it would be acceptable if everyone, in every situation made the same decision

– Divine command derives its authority from religion– According to virtue ethics, the key to good ethics

lies not in rules, rights or responsibilities but in the classic notion of character


Summary of module

• Universalism is explained by Kant by the principle of Categorical Imperative, which means duty with without an exception

• Certain difficulties with this are – Truth at all costs and time– Circular logic: It is fair to cheat in a land of

cheats• The end of module


eiv mod 4 ethical theories

Documents