This document provides an overview of ethical theories and their application to business, including: - Utilitarianism as formulated by Jeremy Bentham and John Stuart Mill, which evaluates actions based on their consequences and maximizing happiness. It supports market economics but faces challenges in measurement and balancing individual freedom. - Deontology focuses on duties and obligations over consequences. Divine Command Theory holds that our duty is to obey God's commands. - Both theories can inform business policy, with utilitarianism emphasizing experts, efficiency and aggregate welfare and deontology emphasizing duties to stakeholders. Overall the document examines how ethical theories underpin discussions of business ethics and governance.

1. Good Governance and
Social Responsibility
LESSON 2: ETHICAL THEORY AND BUSINESS
RESEARCHED AND PREPARED BY:
EDEN U. ALBERTO, MBA, LLB, MPA
PROFESSOR

2. Learning Objectives
 Understand the basic categories and concepts of
ethical theory
 Identify the errors of ethical relativism
 Explain the ethical theory of utilitarianism
 Explain how utilitarian ethics provides support for
market economics and business policy;
 Clarify several major challenges to utilitarian ethics
 Explain the rights and duty of ethics of deontology

3. Question to Ponder?
 Have you ever been in a situation where you
disagreed with somebody else (friend, parent,
teacher) about what was wrong or right?
 Who was “right” in that situation? You or the other
person?

4. What is Ethical Relativism?
 Ethical relativism – holds that ethical values and
judgments are ultimately dependent upon, or
relative to, one’s culture, society, or personal
feelings.
 Ethical Relativism is the belief that there are
no universal standards for what is right and
wrong; something that may be considered “right” in
one society could be considered “wrong” in another.

5. Utilitarianism
 the ethical doctrine that the moral worth of an
action is solely determined by its contribution to
overall utility, defined as happiness or pleasure
(versus suffering or pain),

6. Modern Ethical Theory: Utilitarian Ethics
ROOTS OF UTILITARIANISM
Philosophers Years
Thomas Hobbes 1588-1697
David Home 1711-1776
Adam Smith 1723-1790~
Classic Formulation
Jeremy Bentham 1748-1832
John Stuart Mill 1806

7. Utilitarianism: Jeremy Bentham
 Greatest Happiness Principle:
• Intensity: How strong is the pleasure?
• Duration: How long will the pleasure last?
• Certainty or Uncertainty: How likely or unlikely is
it that the pleasure will occur?
• Propinquity or Remoteness: How soon will the
pleasure occur?
• Fecundity: The probability that the action will be
followed by sensations of the same kind.
• Purity: The probability it will be followed by
sensations of the opposite kind.
• Extent: How many people will be affected?

8. Utilitarianism: Jeremy Bentham
 Begin with any one person of those whose interests seem
most immediately to be affected by it and take an account:
 Of the value of each distinguishable pleasure which appears to be
produced by it in the first instance.
 Of the value of each pain which appears to be produced by it in the
first instance.
 Of the value of each pleasure which appears to be produced by it
after the first. This constitutes the fecundity of the first pleasure and
the impurity of the first pain.
 Of the value of each pain which appears to be produced by it after
the first. This constitutes the fecundity of the first pain, and the
impurity of the first pleasure.

9. Utilitarianism: Jeremy Bentham
 Sum up all the values of all the pleasures on the one side, and those
of all the pains on the other. The balance, if it be on the side of
pleasure, will give the good tendency of the act upon the whole,
with respect to the interests of that individual person; if on the side
of pain, the bad tendency of it upon the whole.
 Take an account of the number of persons whose interests appear
to be concerned; and repeat the above process with respect to each.
Sum up the numbers expressive of the degrees of good tendency,
which the act has, with respect to each individual, in regard to
whom the tendency of it is good upon the whole. Do this again
with respect to each individual, in regard to whom the tendency of
it is bad upon the whole. Take the balance which if on the side of
pleasure, will give the general good tendency of the act, with
respect to the total number or community of individuals concerned;
if on the side of pain, the general evil tendency, with respect to the
same community.

10. Utilitarianism: Jeremy Bentham
 Practical example:
 Imagine you are a doctor driving to a patient, a young
mother who is about to give birth. It looks like she will
need a Caesarian section. It is late at night and you
come across a car accident on the country road you are
traveling on. Two cars are involved in the accident and
both drivers are unconscious and have visible injuries.
One of the men is the father of the child you are going
to deliver, and the other man is very old. You do not
know the extent of their injuries but in your opinion,
without immediate medical help, one or both may die.
You as a Utilitarian are now faced with one of three
possible solutions:

11. Utilitarianism: Jeremy Bentham
You help the young mother who's about to give birth.
You help the young woman's husband.
You help the old man.
 The outcome of The Greatest Happiness Calculus would be:
Attending to the mother first is your primary concern as the
doctor. The death of both mother and child is almost a certainty if
you do not act now, whereas the death of the men is uncertain.
Furthermore, the pain of the mother is clearly greater than that of
the men at this time. There is a greater richness and purity in
saving the life of a young child who has, in all probability, a long
happy life ahead. Therefore the extent and duration of the utility
created by these two people is a clear likelihood.

12. Utilitarianism: Jeremy Bentham
Attending to the young husband is the next priority. The
pleasures of a new family—its intensity, duration, extent,
richness, and purity—are all clear probabilities. If, as the
doctor, you attend him first his wife and child would in all
probability die. The man would then experience pain. The
pain experienced by the widowed husband is likely to
outstrip any pleasure to be gained from continued life
without his loved ones.
Attending to the old man is the last priority. The duration and
certainty of his future pleasure are questionable owing to his
age—he has all but lived his life. This is sometimes known
as the 'good innings' argument, according to which the older
you are the less claim you have to life

13. Utilitarianism: John Stuart Mill
 On liberty:
• each individual has the right to act as he wants, so long as these
actions do not harm others
• If the action is self-regarding, that is, if it only directly affects
the person undertaking the action, then society has no right to
intervene
 Free Speech:
• Society must allow people to air false opinions
• individuals are more likely to abandon erroneous beliefs if they
are engaged in an open exchange of ideas
• Debate keeps beliefs from declining into mere dogma

14. Utilitarianism: John Stuart Mill
Quote:
“The sole end for which mankind are warranted, individually or
collectively, in interfering with the liberty of action of any of their
number, is self-protection. That the only purpose for which power
can be rightfully exercised over any member of a civilized
community, against his will, is to prevent harm to others. His own
good, either physical or moral, is not sufficient warrant. He cannot
rightfully be compelled to do or forbear because it will be better for
him to do so, because it will make him happier, because, in the
opinion of others, to do so would be wise, or even right...The only
part of the conduct of anyone, for which he is amenable to society, is
that which concerns others. In the part which merely concerns
himself, his independence is, of right, absolute. Over himself, over
his own body and mind, the individual is sovereign.”

15. Utilitarianism: John Stuart Mill
 The maximization of happiness of pleasure or happiness
is the moral end of society
 Quality, not quantity (as in Bentham’s theory) of pleasure
matters more
 Humans collectively develop rules to aid them in
achieving happiness
 Each person wants to appropriate goods to satisfy their
own material needs
 These goods are scarce
 There will be competition over these goods (others will
covet what each person has)

16. Utilitarianism: John Stuart Mill
 What one really wants is not a maximization of goods
but a satisfactory level of goods, along with security
that these goods will not be taken away
 Social norms for the distribution of these goods may be
can be established
 Rules for the enforcement of these norms may be agreed
upon
 These rules result in the maximization of the general
well-being

17. Things to Ponder: Utilitarianism
 Tells us that we can determine the ethical
significance of any action by looking to the
consequences of the act.
 Is typically, identified with the policy of
“maximizing the overall good” or on a on a
slightly different version of producing “the
greatest good for the greatest number” ~

18. Things to Ponder: Utilitarianism
 It is often times perceive to be a Consequentialist
ethics.
 Good and bad act are determined by their
consequences.
 In this way, utilitarian's tend to be pragmatic
thinkers. No act is ever right or wrong in all cases in
every situation.
 It will all depend on consequences

19. Objections to Ethical Relativism
 However, most ethicists (people who study ethics)
do not believe in this theory.
 There are a variety of reasons for why they do not
fully agree with ethical relativism.

20. Objections Continued
 Some argue that the principles of ethics
remains the same across the world, even if
people express it in different ways.
 For instance, in a culture where people were killed
when they became old (so that they would enter the
afterlife stronger), they argue that the reason for
doing this was a universal reason: the need to take
care of one’s parents.

21. Objections Continued
 Another argument that the ethicists have is that
while some beliefs are based within a culture, some
are universal.
 This is especially true for practices that are forbidden
or regulated by international laws (slavery, torture).

22. Objections Continued
 In addition, ethical relativism has come under fire
because it implies that people must do whatever
their society tells them to do.
 This is obviously not true in many cases, and if
people did not challenge their societies’ beliefs, many
things would have never changed.

23. Objections Continued
 Even if we reject a lot of what ethical relativism says,
it is still important because it reminds us that
different societies and different cultures have
different beliefs on issues of what is wrong
and right.

24. Challenges to Utilitarianism
1. Problems raised from within a utilitarian
perspective that involve finding a defensible
version of utilitarianism;
2. Problems raised from outside that challenge the
plausibility of the entire utilitarian project.

25. Challenges debated WITHIN utilitarian
Perspective
1st: all utilitarian's must find a defensible way to
measure happiness.
 Phrases like “maximize the over good” and the
“greatest good for the greatest number” require some
form of measurement and compassion.

26. Solutions
 Jeremy Bentham went to great lengths to develop a “hedonistic
calculus”
 Hedonic calculus a method of working out the sum total of pleasure
and pain produced by an act, and thus the total value of its
consequences, also called the felicific calculus. When determining
what action is right in a given situation, we should consider the
pleasures and pains resulting from it, in respect of their intensity,
duration, certainty, propinquity, fecundity (the chance that a
pleasure s followed by other ones, a pain by further pains. Purity,
(the chance that pleasure is followed by pains and vice versa) and
extent (the number of person affected).
The Penguin Dictionary
http://www.utilitarianism.com/hedcalc.htm

27. Solutions
 John Stuart Mill left it to the judgment of a majority
of well informed, competent judges
 Economists substitute such measures as the Gross
National Product for determining overall happiness
 But there simply is no consensus among utilitarian's
on how to measure and determine the overall good.

28. Challenges debated WITHIN utilitarian
Perspective
2nd : Problem with utilitarian perspective deals with
differing versions of the good and the implication for
human freedom.

29. Note:
 There is a tension between objective accounts of the
good and individual freedom
 Free individuals not always choose to do what is
good for them
 If we know what is truly good, then individuals ought
to act in certain ways (to maximize the good) even if
they don’t want to.
 Finding a balance between individuals freedom and
the overall good is a challenge that confronts most
version of utilitarianism

30. Challenges debated WITHIN utilitarian
Perspective
3rd and Final Challenge
the final challenge is raised not from within the
utilitarianism perspective but goes directly to the
core of utilitarianism.
 The essence of utilitarianism is its consequentialism.
Good and bad acts are judged by their consequences.
 But this seems to deny one of the earliest and most
fundamental ethical principles that many of us have
learned “the ends don’t justify the means”

31. Utilitarianism and Business Policy
 At its most basic, utilitarianism is a social
philosophy, offering criteria by which the basic
structure of social institutions, such as business and
the economy, ought to be determined.

32. Utilitarianism and Business Policy
1st – one version of utilitarianism is that public policy
holds that there are experts who can predict the
outcome of various policies and carry out policies
that will attain our ends.

33. Utilitarianism and Business Policy (cont’d)
 This approach to public policy underlies one theory
of the entire administrative and bureaucratic side of
government

34. Utilitarianism and Business Policy (cont’d)
2nd – a second influential version of utilitarian policy
invokes the tradition of Adams Smith.
 He claims that competitive markets are the best
means for attaining utilitarian goals.

35. Utilitarianism and Business Policy: Conclusions
 Policy experts at all levels are focused on results
and on getting things done~
 The utilitarian emphasis on measuring, comparing,
and quantifying also enforces the view that policy
makers should be neutral administrators~
 The job of social policy is to help them attain these
goals in an efficient manner possible. EFFICIENCY
is simply another word for maximizing happiness.

36. Utilitarianism and Business Policy: Conclusions
 Finally, like utilitarian’s policy experts are
concerned with the well being of the whole
community.
 Their focus is on the collective or aggregate good
policy makers take a broad social perspective.

37. Deontological Ethics
 The word is derived from the Greek word, deon,
meaning duty. Plato suggests a duty to be just and
a duty to obey laws.
 The concept of acting out of duty, goes back at least
to the ancient Hebrews and relates to Divine
Command Theory.

38. Divine Command Theory
 is the idea that we have a duty to obey God, and
therefore a duty to do or not do whatever
God has commanded us to do or not do.
 Divine Command Theory is a moral theory, and
moral theology, but, strictly speaking, it is not
normative moral philosophy.
WHY NOT?

39. Divine Command Theory
 Divine Command Theory is not normative
moral philosophy, if philosophy is defined as the
systematic inquiry into the nature of things (such
as norms), based on logical reasoning or
rationality.
 Divine Command Theory has been variously
categorized as moral prescriptivism, as moral
theology, and as deontological ethics.

40. Duty
 A duty is something one is required to do. It is an
obligation, a responsibility.
We may have a variety of duties to others:
 employers and employees
 parents and children
 citizens and government officials
 God (?)
WHAT ARE SOME OF YOUR DUTIES?

41. Duty: Kinds
Duties may be of different kinds:
 positive and negative duties
 duties to self and duties to others
 direct duties and indirect duties
WHAT ARE SOME OF YOUR
DUTIES?

42. Positive and Negative Duties

43. Duties to Self and Duties to Others

44. Direct Duties and Indirect Duties

45. What are my duties, according to reason?
 A duty to preserve reason.
 A duty to preserve truth.
This duty is necessary to preserve reason.
 A duty to preserve life.
This duty is necessary to preserve my reason.
 A duty to preserve freedom.
This duty is necessary to preserve reason and
the inquiry after truth.

46. Deontological Ethics :IMPERATIVES
An imperative is a command to act. It is
prescriptive.
There are two kinds of imperatives:
1. HYPOTHETICAL imperatives
2. CATEGORICAL imperatives
SO, WHAT IS A HYPOTHETICAL IMPERATIVE?

47. Hypothetical Imperatives
 Are commands that are not absolute, but
conditional, and premised on one’s desires.
 The form of a hypothetical imperative is:
“If you want Y, you ought to X.”
(Y = goal/consequence/end; X = means)
 An example of a hypothetical imperative is: “If you
want to pass this test, you ought to study.”

48. Categorical Imperatives
 Are absolute and unconditional moral commands.
 The form of a categorical imperative is:
“You ought to X.”
(X = END-IN-ITSELF, without regards to MEANS or other ENDS)
 An example of a categorical imperative is: “You
ought to study [because you are a student].”

49. Categorical Imperative (1)
(The Principle of Autonomy)
“Act in regard to all persons in ways that treat them
as ends in themselves and never simply as means
to accomplish the ends of others.”
THIS IS THE BASIS FOR THE ETHICS OF RESPECT AND A BASIS
FOR THE ETHICS OF RIGHTS

50. The Categorical Imperative (2)
(The Principle of Universality)
“Act only from those personal rules that you can
at the same time will to be universal moral laws.”
THIS IS A BASIS FOR THE ETHICS OF RIGHTS
WHAT ABOUT RIGHTS …AND DUTIES?

51. Rights and Duties
If we act on the assumption that we have rights
because of the principle of autonomy/respect, we
must act on the assumption that others have rights
as well, because of the principle of universality.

52. Rights and Duties
If we have a duty to protect our rights, we have a
duty to protect the rights of others as well.

53. Rights and Duties
Rights correlate with duties.
 If I have a right, others have the duties to respect
that right.
 If I have a right by virtue of my autonomy, then
others have rights as well, and I have a duty to
respect those rights.

54. Rights and Duties
Rights correlate with duties.
 If I have a right, others have the duties to respect
that right.
 If I have a right by virtue of my autonomy, then
others have rights as well, and I have a duty to
respect those rights.

55. Rights and Duties
 A legitimate right is a claim that can limit
the freedom of others.
 Some duties are determined by special roles that
we have, and so do not directly correlate with
others’ rights.

56. Some Applications of Deontological Ethics:
 Kantian ethics holds that animals exist for the sake
of man because they are not autonomous, or
rational. He holds that we do not have any direct
ethical obligations toward animals, but may use
them as a means to our end (e.g., for food).

57. Some Applications of Deontological Ethics:
 However, Kant did write that we may have indirect
duties toward animals. In his thinking, we ought to
be kind to animals out of respect for humanity. For
Kant, non-human animals had no rights.

58. Some Applications of Deontological Ethics:
 Some modern deontological ethicists such as Tom
Regan argue that we must consider the rights of
nonhuman animals.
 He argues that we should define autonomy in terms
of the ability to initiate action to satisfy preferences.
This definition includes some animals as well as
humans.

59. Some Applications of Deontological Ethics:
 In the matter of suicide, according to Kant, we all
have a negative duty not to commit suicide,
because such an act contradicts the concept of
human rationality and freedom (autonomy). It is
choosing not to choose, not to live.

60. Some Applications of Deontological Ethics:
 In the matter of punishment, Kant despised the
Utilitarians who said that punishment should be
rehabilitative.
 He believed that rehabilitation was using people as
a means to an end, because we are trying to mold
people into what we think they should be.

61. Reference
 An Introduction to Business Ethics
Joseph DesJardins (2009) McGraw-Hill
To God Be the Glory