Ethical Theories

Morals define our character; ethics dictate the working of a social system. Ethics point towards the application of morality. In the wake of this understanding, national, social and workplace ethics are based on the abstract moral codes adopted and adhered to by each member of the group. Ethics lay down a set of codes that people must follow. Ethics are relative to peers, profession, community, society and nation. Morals are and are dependent on an individual’s choice or beliefs or religion and can mean doing the right or wrong thing.

An example to help you understand the difference would be: Abortion is legal and therefore medically ethical, while many people find it personally immoral. Ethics can be relatively simple to follow, while applying morals can be decidedly tougher. There can be a moral dilemma, but not an ethical one. While good morals represent correct and upright conduct, ethics act more as guidelines. Ethics are applicable or adhered to by a group or community or society, whereas morals relate to individuals.

As we can see from the above discussion that ethics and morals may seem similar, but are in fact rather distinct. While morals constitute a basic human marker of right behavior and conduct, ethics are more like a set of guidelines that define acceptable behavior and practices for a certain group of individuals or society. Deontological theories: Deontological theories are the category of normative ethical theories. It is a form of moral philosophy centered on the principles of eighteenth century philosopher Immanuel Kant. Its name comes from the Greek words Deon and logos, meaning the study of duty.

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Deon means duty. Actions are morally right are those in accordance with certain rules, duties, rights and maxims. Deontological theories hold that an action’s tightness or wrongness depends on its conformity a certain moral norm regardless of the consequences. Actions can be morally permitted, required or forbidden. Consequences of the activities are not important according to deontological theory. The basis of deontology is to assess a person’s character by how well he or she follows moral rules, even if by doing so, tragic results occur.

Deontology always advocates the Right over the Good. The deontological model of ethics determines the correctness of a moral action by determining if it follows moral norms. For instance, Kant gave the example that it is wrong to lie even if it could save a person’s life. The agent-centered theory of deontology: focus on the duties of the moral agent (the person acting); rather than the rights of person being acted upon (patient centered theory). Act only according to that maxim where by you can at the same time as an end and never merely as a means to an end.

Lying is forbidden, because if lying is a universal action, society would be undermined. Also it is states that people’s moral choices are determined by personal obligation and permission. For instance, a parent is obligated to treat his or her child as more important than other people; however, other adults have no obligation to treat that parent’s child any differently than anyone else. Since people can have personal obligations that are different from other people, they also have permission to protect their obligations at the expense of others.

In this theory, a parent has permission to save his or her own child even if it means causing negative or tragic consequences for other people’s children. The patient-centered theory: that deal with rights, it means an action is wrong if it violates a person’s right (life, liberty, property/ the pursuit of happiness) or against being used only as a means for producing good consequences without one’s consent. It centers on the rights of individuals rather than personal duty. It states that individuals have the right to not be used for moral good against their wills.

For instance, a murderer cannot be killed without his or her permission even if it would save several lives. The Advantages of Deontological Theories Deontological morality leaves space for agents to give special concern to their families, friends, and projects. At least that is so if the deontological morality contains no strong duty of general generosity or, if it does, it puts a stopper on that duty's demands. Deontological morality, therefore, avoids the overly demanding and excluding aspects of consequentialism and accords more with traditional notions of our moral duties.

The Weakness of Deontological Theories Paradox of deontological theories: We are for forbidden from violating certain duties and rights even to prevent more violations of certain duties and rights. Deontological theories have also weak spots. First and most important of all, is the seeming irrationality of the having duties or permissions to make the world morally worse. Deontology is and will always be paradoxical, unless a nonconsequentialist model of rationality is created; deontologists need to defuse the model of rationality that motivates consequentialist theories.

The Golden rule: is known as the ethic of reciprocity, this famous cross-culture maxim states: “Do to others as you want them to do to you”. Humanists try to embrace the moral principle known as the ‘Golden Rule’, otherwise known as the ethic of reciprocity, which means we believe that people should aim to treat each other as they would like to be treated themselves – with tolerance, consideration and compassion. Humanists like the Golden Rule because of its universality, because it is derived from human feelings and experience and because it requires people to think about others and try to imagine how they might think and feel.

It is a simple and clear default position for moral decision-making. Sometimes people argue that the Golden Rule is imperfect because it makes the assumption that everyone has the same tastes and opinions and wants to be treated the same in every situation. But the Golden Rule is a general moral principle, not a hard and fast rule to be applied to every detail of life. Treating other people as we would wish to be treated ourselves does not mean making the assumption that others feel exactly as we do about everything.

The treatment we all want is recognition that we are individuals, each with our own opinions and feelings and for these opinions and feelings to be afforded respect and consideration. The Golden Rule is not an injunction to impose one’s will on someone else! Trying to live according to the Golden Rule; means trying to empathize with other people, including those who may be very different from us. Empathy is at the root of kindness, compassion, understanding and respect – qualities that we all appreciate being shown, whoever we are, whatever we think and wherever we come from. Consequentialism:

Hold that; this action’s rightness or wrongness depends on consequences it causes (happiness or pain). Consequentialist theories say that; the moral rightness of action can be determined by looking at its consequences, if the consequences are good, the act is right. The right act produces greatest ratio of good to evil of any alternative. If the consequences are bad the act is wrong. Lying generally is bad according to ethics, but if we don’t say that her illness to woman with cancer may be it will be better. Consequentialism is a moral theory, which stands under the normative ethical theories.

It can be used as guidelines to enlighten on how to resolve moral issues. This specific moral theory focuses on the consequences of one’s actions, rather than looking at the rightness and wrongness of an act. Therefore a morally right act is an act that creates a good result or consequence. According to this theory the ethically correct decision is the one that produces the best consequences: “The end justifies the means”. Consequentialists realize and accept the fact that difficult moral choices sometimes injure others. Thereby they are more flexible than duty-based theorists.

It is most important to look at consequences and analyze the results’ impact on other people. Thereby this theory is good in ethical dilemmas, because it concentrates on the impact of our behavior on others. There are two types of consequentialist theories: 1- Egoism 2- Utilitarianism 1- Egoism It contends that an act is moral when it promotes the individual’s best long term interests. If an action produces or is intended to produce of greater ratio of good to evil for the individual in the long run than any other alternative, then it is the right action to perform.

Ethical egoism claims that it is necessary and sufficient for an action to be morally right that it maximize one's self-interest. Egoism: The view that morality coincides with the self-interest of an individual or an organization. Egoists: Those who determine the moral value of an action based on the principle of personal advantage. An action is morally right if it promotes one’s long-term interest. An action is morally wrong if it undermines it. There are two types of egoism: a- Personal egoism: You pursue your own best interest, but don’t care what others do.

Personal egoists claim they should pursue their own best long-term interests, but they do not say what others should do. Personal egoists pursue their own self-interest but do not make the universal claim that all individuals should do the same. Personal Egoism is a view according to which an individual claims that he/she ought do what is in his/her long term self-interests but cannot tell others what they should do. b- Impersonal egoism: You believe everyone should be an egoist. Impersonal egoists claim that everyone should follow his or her best long-term interests.

Impersonal egoists: Claim that the pursuit of one’s self-interest should motivate everyone’s behavior. Impersonal Egoism requires that each person act in his or her own self-interest regardless of the interests of others (unless it so benefits him/her). This does not prevent people cooperating with each other even when there are different self-interests. Misconceptions about egoism: Egoists do only what they want, not true. Egoists don’t possess virtues like honest, generosity and self-sacrifice, not true. Egoist can possess all of these virtues, as long as they advance long term self-interest.

Egoism can’t resolve conflict of egoistic interest. Egoists only do what they like, not so. Undergoing unpleasant, even painful experience meshes with egoism, provided such temporary sacrifice is necessary for the advancement of one’s long-term interest. All egoists endorse hedonism (the view that only pleasure is of intrinsic value, the only good in life worth pursuing) although some egoists are hedonistic, others have a broader view of what constitutes self-interest. Egoists cannot act honestly, be gracious and helpful to others, or otherwise promote others’ interests.

Egoism, however, requires us to do whatever will best further our own interests, and doing this sometimes requires us to advance the interests of others. 2- Utilitarianism: Originally formulated Jeremy Bentham in 18th century and developed by J. Stuart Mill in 19th century. Greatest good is the foundation for morality. Determinations of morality are based on the application of the moral law to an action. Principle of Utility or GHP (Greatest Happiness Principle) is the moral law. GHP states that an action is right in proportion to its ability to promote pleasure/happiness.

It is wrong in proportion to its ability to promote unhappiness/pain. Right action = pleasure/happiness Wrong action = unhappiness/pain According to Mill; Satisfaction depends on the attainment of pleasure, and pleasure depends on right action. Right action has to conform to the GHP. Satisfaction has to conform to the GHP. GHP is moral, greatest happiness principle refers to collective happiness not individual happiness. Standard of morality govern human conducts. If my action conforms to the standard of morality then my action is moral.

Happiness of community is more important than personal happiness. You should sacrifice your personal interest for community happiness. Sacrifice is always done some end. Sacrifice for the greater good is the highest virtue. Utilitarianism is based off of the Greatest Happiness Principle which states that actions are considered moral when they promote utility and immoral when they promote the reverse. Utility itself is defined by Mill as happiness with the absence of pain. The main elements of this philosophy are one's actions and their resulting utility.

A person is considered moral when their actions tend to promote utility of the general public in accordance with the Greatest Happiness Principle. However, just an action increasing utility does not necessarily imply a moral action. In order for the action to be moral it must be the optimal choice in increasing utility and minimizing pain. Since it is difficult to determine the superior of two vastly different results, Mill provides us with a system to determine which choice would have the higher quality. This system has the proper judges of the actions determine which they prefer.

Whichever is preferred by a majority is considered the action with a higher quality result and thus would be more moral to perform than the action with a lower quality result. In the result of a tie, both choices are considered equally moral. The Greatest Happiness principle also allows for us to cause pain to others as long as a majority of the people becomes happier. We could essentially just steal resources from smaller foreign countries and drive them to poverty as long as more people benefit than lose. Things such as slavery, bullying, rape, racism, and murder could be justified under Utilitarianism as long as the majority prefers it.

Murderers could justify their action by simply killing all of those who opposed them. Once their numbers became the majority, murdering became justifiable as moral. Lastly, the Greatest Happiness principle eliminates the usage of the laws provided by our government. As long as the person's actions increase general utility, then it does not matter how many laws are broken in the process. We could all go speeding down roads and ignoring traffic signals/signs to our full enjoyment despite there being speed limits as long as few people cared and most people would be having a blast.

Following examples are used to illustrate the concept of utilitarianism. Say that one has promised to a friend to meet up at six o'clock. Is it acceptable to break this promise in order to rescue someone from a burning building? Consequentialist is only concentrating on the consequence. Therefore, when looking at the result a consequentialist might say “no” as the consequence would be breaking a promise and in this way it could harm the friendship. On the other hand a consequentialist might say “yes” if the result might be saving another person’s life, even though it would demand breaking a promise.

In utilitarianism it depends on the one making a decision. Therefore one could justify the killing of a homeless if his organs could be used beneficially, saving for example four other peoples’ lives, who have jobs and family (Frost, 2007: 15). Utilitarianism has many flaws. One of the biggest problems with it is that measuring and comparing happiness among different people is impossible in practice as well as in principle. Shareholder theory: It says that one and only obligation of business is to maximize its profits while engaging open and free competition without fraud.

According to shareholder theorists such as the Nobel winning economist Milton Friedman, managers should inly focus on serving the interests of the firm’s shareholders. Therefore business executives are obligated to follow the wishes of shareholders while obeying the laws and ethical customs of society. On one hand, it is correct to say that the main focus of a business should be to make profit. Without profit, a business cannot survive. In a way, Friedman’s theory does promote social responsibility to society.

The increase of profits in a company benefits the economy which benefits the citizens of the economy. Friedman also believed that social responsibility should not be forced by the government. Responsibility to stakeholders can still be achieved while helping to strengthen the community. For example, companies can conduct research to provide a safer product to consumers. Shareholder Theory, on the other hand, focuses strictly on those who have a monetary share of the company. According to this view, a firm’s only purpose is to serve the needs and interests of the company’s owners.

In many industries there are companies that seem to follow a stakeholder theory framework while guiding the majority of interests towards the shareholders and ultimately enforcing a shareholder theory framework. An analysis of shareholder theory applied to the management styles found in major league baseball has revealed such a conflict of interest. According to shareholder theorists such as the Nobel winning economist Milton Friedman, managers should only focus on serving the interests of the firm's shareholders.

In an article he published in the New York Times, The Social Responsibility of Business is to Increase its Profits, he states, “Responsibility is to conduct the business in accordance with their [shareholder’s] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. ” (Friedman, 1970) Stakeholder theory: Freeman; who has contributed a lot to this approach, he defines stakeholders as “any group or individual who can affect or is affected by the achievement of the organization objectives.

Normative stakeholder theory contains theories of how managers or stakeholders should act and should view the purpose of organization, based on some ethical principle (Friedman 2006). Another approach to the stakeholder concept is the so called descriptive stakeholder theory. This theory is concerned with how managers and stakeholders actually behave and how they view their actions and roles. Stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by R.

Edward Freeman in the book Strategic Management: A Stakeholder Approach, and identifies and models the groups which are stakeholders of a corporation, and both describes and recommends methods by which management can give due regard to the interests of those groups. In short, it attempts play to address the "Principle of Who or What Really Counts. "[1] In the traditional view of the firm, the shareholder view, the shareholders or stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first, to increase value for them.

However, stakeholder theory argues that there are other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, financiers, suppliers, employees, and customers. Sometimes even competitors are counted as stakeholders - their status being derived from their capacity to affect the firm and its other morally legitimate stakeholders. The nature of what is a stakeholder is highly contested (Miles, 2012),[2] with hundreds of definitions existing in the academic literature (Miles, 2011). 3] The stakeholder view of strategy is an instrumental theory of the corporation, integrating both the resource-based view as well as the market-based view, and adding a socio-political level. This view of the firm is used to define the specific stakeholders of a corporation (the normative theory (Donaldson) of stakeholder identification) as well as examine the conditions under which these parties should be treated as stakeholders (the descriptive theory of stakeholder salience). These two questions make up the modern treatment of Stakeholder Theory. Who are stakeholders?

A very different way of differentiating the different kinds of stakeholders is to consider groups of people who have classifiable relationships with the organization. Friedman (2006) means that there is a clear relationship between definitions of what stakeholders and identifications of who are the stakeholders. The main groups of stakeholders are: * Customers * Employees * Local communities the main groups * Suppliers and distributors * shareholder * The media * The public in general * Business partners * Future generations * Past generations (founders of organizations) Academics * NGOs * Stakeholder representatives such as trade unions or trade associations of suppliers or distributers * Government, regulators, policymakers Primary: a firm cannot exist without their continuing participation. Primary stakeholders include: shareholders & investors, employees, contractors, customers & suppliers. Secondary: those who influence or affect or are influenced/affected by, the corporation, but they are not engaged in transactions with the corporation or essential for its survival. Secondary stakeholders include: media, action groups, government agencies, trade unions, regulatory authorities.

Non-social stakeholders do not involve human relationships, which may also be divided into primary (direct) and secondary (indirect), for example, natural environment, nonhuman species, future generations and their defenders in pressure groups. They are neither influenced by nor a factor in the survival of the organisation (Wheeler & Sillanpaa (1998): p205, Vandekerckhove & Dentchev (2005): p222). Freeman (1984) argued that it is easy but extremely detrimental for managers to assume that stakeholders who oppose them are irrational and irrelevant.

Additionally, this issue is further reinforced by arguing that there is wide variation in stakeholder claims, interests and rights (Hall & Vredenburg, 2005:p11). Internal stakeholders are those in the management, marketing experts, designers, purchasing, manufacturing, assembly and sales, while external stakeholders are the users/customers, distributors, governments, suppliers, communities, laws and regulations. Political stakeholders can be divided into 2 different sub-group; ‘national stakeholders’ and ‘international stakeholders’ (Holtbrugge, Berg & Puck, 2007).

National stakeholders include governmental actors such as central government, state government, local authorities and also non-governmental organizations or NGOs. On the other hand, international stakeholders are those supranational organizations which constituted by national government (IMF, WTO) and also NGOs (Greenpeace, international association of trade unions, international media). Both governmental actors and supranational organizations are classified as ‘public stakeholders’ while NGOs are classified as ‘private stakeholders’.

Hillman & Hitt (1999) proposed a typology which distinguishes between 3 different strategies of political stakeholders: 1. Information strategy: - Seeks to affect the actions of political stakeholders by providing them specific information about preferences for policy or political positions. 2. Financial incentives strategy: - Aims to influence the actions of political stakeholders through financial inducements which may include hiring personnel with direct political experience such as managers or consultants, providing financial support or community bribery of decision makers. . Reputation-building strategy: - Tries to influence political stakeholders indirectly through stakeholder support. The main instruments to achieve this goal are public relations and codes of conduct. The idea of grouping the different types of stakeholders is a noble one. It helps to improve the understanding and appreciation in managing stakeholders. For this, Kolk & Pinkse (2006:p62) came out with the grouping of stakeholders into two groups, based on potential for threat and for cooperation and, based on concomitant strategies, as shown in Figure 4.

Briner et al (1996) indicated 4 different sets of stakeholders namely: client project leader’s organization, outside services and, invisible team members. In the case of corporate and business environment, Colacoglu, Lepak & Hong (2006: p211) cited that there exist three primary groups of stakeholders that exert distinct pressures on organizations and are directly impacted by the performance of organizations. 1. Companies must attend to the needs of capital market stakeholders-shareholders and major suppliers of capital such as banks. 2.

Companies must consider the needs and demands from product market stakeholders-the primary customers, suppliers, unions, and host communities with whom organizations conduct business 3. Companies must consider the needs of organizational stakeholders, the employees and managers within the organization. IDENTIFYING The first Step in the mapping process is to understand that there is no magic list of stakeholders. The final list will depend on your business, its impacts, and your current engagement objective—as a result it should not remain static.

These lists will change as the environment around you evolves and as stakeholders themselves make decisions or change their opinions Action: Brainstorm a list of stakeholders without screening, including everyone who has an interest in your objectives today and who may have one tomorrow. Where possible, identify individuals. Use the following list to help you brainstorm: * Owners (e. g. Investors, shareholders, agents, analysts, and ratings agencies) * Customers (e. g. direct customers, indirect customers, and advocates) * Employees (e. g. urrent employees, potential employees, retirees, representatives, and dependents) * Industry (e. g. suppliers, competitors, industry associations, industry opinion leaders, and media) * Community (e. g. residents near company facilities, chambers of commerce, resident associations, schools, community organizations, and special interest groups) * Environment (e. g. nature, nonhuman species, future generations, scientists, ecologists, spiritual communities, advocates, and NGOs) * Government (e. g. public authorities, and local policymakers; regulators; and opinion leaders) * Civil society organizations (e. . NGOs, faith-based organizations, and labor unions) To facilitate important stakeholder mapping, Freeman suggests the following questions: In 1984 Edward Freeman offered questions that help begin the analysis of identifying major stakeholders: * Who are our current and potential stakeholders? * What are their interest/rights? * How does each stakeholder affect us? * How do we affect each stakeholder? * What assumption does our current strategy make about each important stakeholder? * What are the environmental variables that affect us and our stakeholders? How do we measure each of these variables and their impact? * How do we keep score with our stakeholders? Stakeholder versus Shareholder? According to stakeholder theory, the very purpose of the firm is to serve and coordinate the interests of its various stakeholders. These stakeholders can include employees, suppliers, customers and the communities in which the firm operates. It is the moral obligation of the firm’s managers to maintain a balance among these interests when directing the activities of the firm. Shareholder theory, on the other hand, focuses strictly on those who have a monetary share of the company.

According to this view, a firm’s only purpose is to serve the needs and interests of the company’s owners. The Corporate Social Responsibility The way business involves the shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations and other stakeholders is usually a key features of corporate social responsibility concept. CSR involves a commitment through the on-going engagement of stakeholders, the active participation of communities impacted by company activities and public reporting of company policies and performance in the economic, environmental and social arenas.

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business)[1] is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.

CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R.

Edward Freeman, Strategic management: a stakeholder approach in 1984. [2] Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers.

Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

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