As an organisation progresses and becomes more significant, the greater impact it has on the people, environment and social. In this competitive environment, business ethics plays an important role in an organisation to determine its reputation and sustainability as it acts as a guide to influence and reinforce an organisational behaviour. Managing an organisation is not solely about self-interest of making profits anymore, decisions and actions have to be exercised with consideration to align with its principles and standards. Although there might be issues about what is the right ethical decision to make, however there is no standard definition as it differs from every individual perspective within and around the organisation.
This essay would assess the ethical theories with different perspective and evaluate the positive and negative impact among the theories. Then determine an ethical theory that is considered most useful in guiding an organisation decision.
Normative Theories on Ethics
In business ethics, normative theories established some fundamental principles to distinguish the right decisions from the wrong decisions. Kagan (1998) stated that the normative theories emphasis on how people should act, not how people do act; it is the moral beliefs of a society that reflect how people should behave. As business ethics are fostered through different decisions and cultural aspects, the normative theories are characterised into two main perspective: consequence based and non-consequential based.
Consequence Based: Ethical Egoism, Utilitarianism and Virtue Ethics
Consequence based approach is to determine the rightness of a decision based solely based on the result. When the consequence is positive, the decision is right, while when consequence is negative, the decision is wrong. Thus, an organisation with consequence based approach make a decision on the weighing the ratio of the good and bad consequences. However, what would be the consideration and determinant for the consequences? The three consequence based approaches: ethical egoism, utilitarianism and virtue ethics differentiate its views in the following.
Egoism views personal interest as its moral guiding principle. Where decision rightness is defined in terms of its own self-interest. Thus, in a situation when faced with a business dilemma, an egoist would be inclined to make the decision that is believed to serve own interest. In favour of ethical egoism, Wong (2006) stated that every individual has the right to pursue their own interest and placing their desire over others. Where deemed that if every individual pursue own self-interest in a competitive society, it would benefit the society as a whole eventually. However, many philosophers have constantly refuted egoism and refuse to accept it as an ethical theory. According to Quinn (1974),who claimed against the standard of ethical egoism, since self-interest might not be equivalent to the rational morality, egoism might face conflicts of interest resulting in potentially unethical conduct. Moreover, if ethical egoism was to be practiced by all individual, it would places oneself in a higher importance than the rest and would result in inequity and imbalance of harmony in the society. Ethical egoism might not be a well-accepted application in business, but it does exist in small companies where the lack of social obligation is unlikely to threaten the livelihood of business.
Unlike ethical egoism, utilitarianism is concerned with making decision that result in the maximum of good consequence for maximum individuals. When the consequence causes happiness, it is moral; when the consequence causes unhappiness, it is immoral. To derive to a decision, utilitarianism would perform a benefit/cost analysis by identifying the course of action that could be executed and weight the possible benefits for each course. Then, the decision would be chosen based on the action that yield the maximum benefit over the greatest number of people. According to Allhoff and Vaidya (2005), utilitarianism might sound like an equity approach to fulfil the interest of all individuals as it considers the interest of all relevant individual. Andre and Velasquez (1989) mentioned that even though utilitarianism is a popular ethical theory among organisations, it is challenging to rely on it solely for moral decision-making. Also, Preuss (2000) argued that utilitarianism is not practical as it is complex to determine what is considered happiness to different individual, especially when it involves different parties with different interest, it might not be possible to satisfy every needs. Furthermore, utilitarianism might have the tendency to introduce biasness to elevate majority interest over the expense of the minority interest. Even so, among the theories, utilitarianism is considered to be the prevalent form of consequentialism among organisations.
In contrast to ethical egoism and utilitarianism, virtue ethics emphasis on the person and virtue in the morality rather than the consequence of an action. The decision would be regarded as moral if the person making the decision is virtue with the aspect in sense of justice, fidelity, self-care and prudence. According to Ferrell, Fraedrich and Ferrell (2012), virtue ethics would be considered as a functional theory since it assesses the character of the person who is making the decision instead. Virtue ethics focus on developing good virtue, where the virtue in turn would lead the person to make the right decision. It is believed that it is important for an organisation to focus on building virtues in all individuals, thus to nurture the individuals’ character and morality in making the appropriate decision (Ferrell, Fraedrich and Ferrell 2012). It is common that organisation applies virtue ethics through its statement of value, or code of conduct to enforce certain regulation that is believed to be moral. For example, Google’s belief in ‘Don’t do evil’ suggests that all the individual within the organisation to comply. However, Nelson and Trevino (2010) countered on the reliance on virtue ethics alone does not guide how one should act when a situation arises. Similarly, the standard of virtue that one should possess might differ in different organisation and culture as well.
Non-Consequential Based: Kantianism and Justice Ethics
While non-consequential based approach views decision made whether if its right or wrong as an independent factor of the consequences. What matters for non-consequential based approach is the nature of intention, not the consequences. For the non-consequential based approach, there are the Kantianism and Justice Ethics.
Kantianism expresses that morality is based on the intention behind the decision instead of the consequences. It is based on the abstract of universal principles where an action is moral only if it is motivated by moral obligation. Kantianism encourages the focus on doing the right like being righteous, honest and upholding integrity. Since kantianism views an organisation as a moral community where individuals are related to achieve common goals, it is immoral for organisation to exploit employees or customers for profit to satisfy the stakeholders. Rendtorff (2009) believes that Kantianism promotes democracy and equity in the business environment and would help to create harmony and peace. In contrary, Smith and Dubbink (2011) feel that given the nature of Kantianism, it is impractical to apply to the business context as the fact that Kantianism encourages organisation to be motivated by its moral duty instead of profit, which is seemingly unrealistic.
On the other hand, justice ethics based moral on the fairness of action. Justice ethics is closely associated with the fair treatment of people and reward based on the merit to comply with the ethical standards. Hartman and Desjardins (2008) matched justice ethics and utilitarianism in the similarity that both follows benefit/cost analysis. However, unlike utilitarianism, justice ethics abide to fairness and equity in the distribution of good. Mandal (2010) believes that justices ethics is useful in an organisation to eliminate any form of inequity and discrimination, thus protect the interest of individual who lacks in influence. Then again, Mandal (2010) also agrees that it is quite difficult to attain a fair distribution as every individual judges fairness with different criteria.