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MBA 685
Chapter #2
Introduction to Ethics
Chapter #2: Introduction to Ethics
1
Chapter #2 Overview
• Introduction to business ethics
• Overview of ethical theories
• Thinking ethically for business decision making
– The PLUS model
– Combining ethical theories
– Code of Ethics
Chapter #2: Introduction to Ethics
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Nature and Significance of Ethics in
Business Decision-Making
• Ethics: Rational examination of moral beliefs and
behavior; the study of morality.
– Morality: Standards, conduct, and systems that provide
guidance on how to act.
• Law: Society’s standards and values that are
enforceable in court
Chapter #2: Introduction to Ethics
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Former Supreme Court Justice Potter Stewart, “Ethics is
knowing the difference between what you have a right to do
and what is the right thing to do.”
Is business ethics an oxymoron?
Chapter #2: Introduction to Ethics
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Overview of Ethical Theories
1.
2.
3.
4.
5.
6.
7.
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory
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Relativism versus Objectivism:
Where “The Good” Exists
1.
2.
3.
4.
5.
6.
7.
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory
Chapter #2: Introduction to Ethics
Relativism
“The
Good” is
inside
Objectivism
“The
Good” is
outside
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The Workable Ethical Theories:
Rational Theories
1.
2.
3.
4.
5.
6.
7.
Subjective relativism
Cultural relativism
Divine command theory
Kantianism
Act utilitarianism
Rule utilitarianism
Social contract theory
Chapter #2: Introduction to Ethics
Not a Workable Theory
According to the Author
Workable Theories
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1. Subjective relativism
• Relativism
– No universal norms of right
and wrong
– One person can say “X is
right,” another can say “X is
wrong,” and both can be right
• Subjective relativism
– Each person decides right and
wrong for himself or herself
– “What’s right for you may not
be right for me”
Chapter #2: Introduction to Ethics
Case for
Well-meaning
and intelligent
people disagree
on moral issues
 Ethical debates
are disagreeable
and pointless

Case against
Blurs distinction
between doing what
you think is right and
doing what you want to
do
 Makes no moral
distinction between the
actions of different
people
 SR and tolerance are
two different things
 Decisions may not be
based on reason
 Not a workable
ethical theory
(according to author)

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2. Cultural relativism
Case for
• What is “right” and
“wrong” depends upon a
society’s actual moral
guidelines
• These guidelines vary
from place to place and
from time to time
• A particular action may
be right in one society at
one time and wrong in
other society or at
another time
Chapter #2: Introduction to Ethics
Different social
contexts demand
different moral
guidelines
 It is arrogant for
one society to
judge another
 Morality is
reflected in actual
behavior

Case against
Because two societies do
have different moral views
doesn’t mean they ought to
have different views
 Doesn’t explain how moral
guidelines are determined
 Doesn’t explain how
guidelines evolve
 Provides no way out for
cultures in conflict
 Because many practices are
acceptable does not mean any
cultural practice is acceptable
(many/any fallacy)
 Societies do, in fact, share
certain core values
 Only indirectly based on
reason
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 Not a workable ethical
theory

Chapter #2: Introduction to Ethics
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3. Divine command theory
(the virtue approach)
• Good actions: those
aligned with God’s will
• Bad actions: those
contrary to God’s will
• Holy books reveal God’s
will.
• We should use holy
books as moral
decision-making guides.
Chapter #2: Introduction to Ethics
Case for
We owe
obedience to our
Creator.
 God is all-good
and all-knowing.
 God is the
ultimate authority.

Case against
Different holy
books disagree
 Society is
multicultural,
secular
 Some moral
problems not
addressed in
scripture
 “The good” ≠
“God” (equivalence
fallacy)
 Based on
obedience, not
reason

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4. Kantianism
(the rights approach)
• Good will: the desire to
do the right thing
• Immanuel Kant: Only
thing in the world good
without qualification is
good will.
• Reason should cultivate
desire to do right thing.
Chapter #2: Introduction to Ethics
Case for
Rational
 Produces
universal moral
guidelines
 Treats all persons
as moral equals
 Workable ethical
theory

Case against
Sometimes no
rule adequately
characterizes an
action.
 There is no way
to resolve a conflict
between rules.
 Kantianism allows
no exceptions to
moral laws.

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Consumer Bill of Rights
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Negative Versus Positive Rights
• Negative right (liberty right): A right that
another can guarantee by leaving you alone
• Positive right (claim right): A right obligating
others to do something on your behalf
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Discussion Questions
1.
2.
In the following (true) scenarios on the
next two slides, tell whether the people
are interpreting the right being claimed
as a negative right or as a positive
right. Explain your choice.
In each scenario, which kind of right
should it be and why?
Chapter #2: Introduction to Ethics
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Scenario A:
A man sued his health insurance company
because it would not pay for Viagra. He
argued that the insurer’s refusal to pay
denied his right to a happy sex life.
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Scenario B:
Two legislators who lost reelection votes
sued an organization that ran ads
criticizing their right to hold office.
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5. Act Utilitarianism
• Jeremy Bentham and John Stuart Mill, 19th century
• The best ethical course of action is the one that brings the
greatest good for the greatest number
– An action is good if it benefits someone
– An action is bad if it harms someone
• Utility: tendency of an object to produce happiness or prevent
unhappiness for an individual or a community
– Happiness = advantage = benefit = good = pleasure
– Unhappiness = disadvantage = cost = evil = pain
• Principle of Utility (The Greatest Happiness Principle)
– An action is right (or wrong) to the extent that it increases (or
decreases) the total happiness of the affected parties.
Chapter #2: Introduction to Ethics
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Act utilitarianism - Continued
• Act utilitarianism
applies Principle of
Utility to individual
actions
• Act utilitarianism
– Add up change in
happiness of all affected
beings
– Sum > 0, action is good
– Sum < 0, action is bad
Chapter #2: Introduction to Ethics
Case for
Focuses on
happiness
 Down-to-earth
(practical)
 Comprehensive
 Workable ethical
theory

Case against
Unclear whom to
include in
calculations
 Too much work
 Ignores our
innate sense of duty
 Susceptible to the
problem of moral
luck

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6. Rule utilitarianism
• We ought to adopt
moral rules which, if
followed by everyone,
will lead to the greatest
increase in total
happiness
• Rule utilitarianism
applies Principle of
Utility to moral rules
Chapter #2: Introduction to Ethics
Case for
Compared to act
utilitarianism, it is
easier to perform
the utilitarian
calculus.
 Not every moral
decision requires
performing
utilitarian calculus.
 Moral rules
survive exceptional
situations
 Avoids the
problem of moral
luck
 Workable ethical
theory

Case against
All consequences
must be measured
on a single scale.
 Utilitarianism
ignores the problem
of an unjust
distribution of good
consequences.

Utilitarianism does not
always mean “the greatest
good of the greatest
number”
 That requires a principle
of justice
 What happens when a
conflict arises between the
Principle of Utility and a
principle of justice?

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7. Social contract theory
(The Common Good Approach)
• Thomas Hobbes
– “State of nature”
– We implicitly accept a social
contract
• Establishment of moral rules
to govern relations among
citizens
• Government capable of
enforcing these rules
• Jean-Jacques Rousseau
– In ideal society, no one above
rules
– That prevents society from
enacting bad rules
Chapter #2: Introduction to Ethics
Case for
Framed in
language of rights
 Explains why
people act in selfinterest without
common agreement
 Provides clear
analysis of certain
citizen/government
problems
 Workable ethical
theory

Case against
No one signed
contract
 Some actions
have multiple
characterizations
 Conflicting rights
problem
 May unjustly
treat people who
cannot uphold
contract

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Thinking Ethically for Business Decision
Making
• How exactly should we think through an
ethical issue?
• What questions should we ask?
• What factors should we consider?
The first step is obvious but not always easy:
GET THE FACTS!
Primary/Direct Stakeholders
Chapter #2: Introduction to Ethics
Secondary/Indirect Stakeholders
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Basic Business Decision Making Model
Step 1: Define the problem
Step 2: Identify alternatives
Step 3: Evaluate the alternatives
Step 4: Make the decision
Step 5: Implement the decision
Step 6: Evaluate the decision
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Example of an Ethical Filter: The
PLUS Model
• P = Policies
Is it consistent with my organization's policies,
procedures and guidelines?
• L= Legal
Is it acceptable under the applicable laws and
regulations?
• U = Universal
Does it conform to the universal principles/values my
organization has adopted?
• S= Self
Does it satisfy my personal definition of right, good
and fair?
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Six Steps to Ethical Decision
Making Using the PLUS Model
Step
Step
Step
Step
Step
Step
1:
2:
3:
4:
5:
6:
Define the problem PLUS
Identify alternatives
Evaluate the alternatives PLUS
Make the decision
Implement the decision
Evaluate the decision PLUS
Chapter #2: Introduction to Ethics
Ethical
Filters
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Using Multiple Theories for Ethical Problem
Solving
1.
2.
3.
4.
5.
6.
–
–
–
What moral rights do the affected parties have, and which
course of action best respects those rights?
What benefits and what harms will each course of action
produce, and which alternative will lead to the best overall
consequence?
Which course of action treats everyone the same, except
where there is a morally justifiable reason not to, and does
not show favoritism or discrimination?
Which course of action advances the common good?
Which course of action develops moral virtues?
Other Approaches
The Legality Test
The Golden Rule Test
The Light of Day Test
Chapter #2: Introduction to Ethics
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Codes of Ethics
(Ethics Codes, Ethics Policies, Core Values, Integrity Policies,
etc.)
• Formal statement of ethical principles and rules of conduct
– United Technologies –
http://www.utc.com/responsibility/ethics/index.htm
– JMU CoB Faculty Integrity Policy http://www.jmu.edu/cob/CoB2/FacPolicies.shtml#FIP
– JMU Finance Code of Ethics http://www.jmu.edu/financeoffice/code_of_ethics.shtml
– Advice from the Ethics Office of Texas Instruments http://www.onlineethics.org/CMS/workplace/workcases/tiethics.aspx
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Copyright 
All Rights Reserved
Copyright  2008 by Theresa B. Flaherty, Ph.D.
No part of these materials may be reproduced or
transmitted in any form or by any means, electronic or
mechanical, including photocopying, recording, or by any
information storage and retrieval system, without the
express written consent of Dr. Theresa B. Flaherty.