Unit 1: Ethics & Business | Unit 2: Ethical Principles in Business
MODULE I: BASIC PRINCIPLES

Introduction

This is undoubtedly the most important chapter of the book.  It introduces most of the significant moral concepts and theories employed in the discussions to follow, and to be applied in the assessment of cases throughout.  Five possibly relevant evaluative factors are distinguished:

1. overall benefit and cost;
2. fairness;
3. rights;
4. care or special duties;
5. character.

Utilitarian ethical theories emphasize overall benefit and cost.  Kantian moral theories emphasize fairness and rights.  Both Kantian and Utilitarian approaches may be faulted for their demand of strict impartiality and consequent under valuation of “special” commitments or duties of “care.”  Virtue ethics, by stressing the centrality of character, leaves room for “special duties” due to the desirability of loyalty as a character trait and love as an expression of character.  Virtue ethics, however, seem vaguer, and more subjective than the other approaches.

Learning Objectives

1. Understand the nature of utilitarian moral calculation and the difficulties and limitations of this approach.
2. Understand the general concept of rights, the distinction between negative rights and positive rights, and the special nature of contractual rights.
3. Understand Kant's attempted deontological justification of rights and the limitations of the Kantian approach.
4. Understand the general concept of justice and distinguish between distributive, retributive, and compensatory justice.
5. Distinguish egalitarian, contribution based, and needs based conceptions of distributive justice.
6. Understand the need to recognize special duties and obligations of care; the special nature of, and constraining conditions on contractual obligation; and the importance of character as emphasized by “virtue ethics”.
7. Appreciate the necessity and the difficulty of integrating considerations of utility, fairness, rights, care, and character.

Key Terms and Concepts

1. Utility: the balance of intrinsic benefits, minus intrinsic costs, for all affected by an action or policy. (§2.1)
2. Utilitarianism: Moral theory that holds that the moral worth – the rightness or wrongness – of an act is entirely determined by its overall consequences and their utility. (§2.1)
3. Intrinsic good: inherent or basic value.  Intrinsic goods are valued for their own sakes, as happiness is.  Intrinsic value stands in contrast to instrumental or extrinsic value.  To have instrumental value is to be valued for the sake of something else -- as means to some further ends -- as money and medical treatment are. (§2.1)
4. Autonomy: freedom or self-determination. (§2.2)
5. Right: an entitlement to act in certain ways, or be treated in certain ways, without being subject to punishment or blame.  Every right (of one) imposes converse duties.  So called “negative rights” impose duties of noninterference (or omission); so called “positive rights” impose duties of assistance or (commission). (§2.2)
6. Duty: a requirement to act in certain ways (duties of commission) or refrain from acting in certain ways (duties of omission) where failure to so act or refrain warrants punishment or blame. (§2.2)
7. Fairness: treatment in accord with the fundamental principle of justice that maintains individuals similar in relevant respects should be treated similarly.” (§2.3)
8. Justice: fairness in awarding repayment (compensatory justice), imposing punishment (retributive justice), or assigning benefits and burdens within society (distributive justice). (§2.3)
9. Categorical Imperative:  An absolute or unqualified commandment – with no “ifs” – such as Kant took the commands of morality to be.  The one categorical imperative from which all the others derive, Kant believed, was to only act on such policies (or “maxims) as you would be willingly to see universally adopted, or alternately (and Kant thought equivalently) to treat humanity in yourself and in others always as an end and never as a means only. (§2.3)
10. Universalizability:  Requirement – imposed by Kant’s Categorical Imperative -- that the policy you act on should be one that you would be willing for everyone to act on. (§2.3)
11. Reversibility:  Requirement – imposed by Kant’s Categorical Imperative – that the policy you act on should be on that you should be willing to have others adopt in their treatment of you. (§2.3)
12. Care: (in the technical sense employed in this chapter): a special duty of partiality limited to specific individuals and arising from contractual or personal relations between those specific individuals. (§2.4)
13. Virtue: A positive (desired and admired) character trait such as courage or honesty.  Negative (undesirable and contemptable traits), such as cowardice and dishonesty, are vices. (§2.6)

Section numbers given are not the only pages on which the terms are found in the text.  Many of these terms will appear on the module exams.  You should write a definition of each term as you encounter it in your reading for use as a convenient review.

Study Directory 

Self-Diagnostic Exam Items	Textbook Pages	Objective
1, 6	61-2, 64-71	1
4	74-5	2
2, 9	78-80, 82-3	3
3, 5	89, 88	4
7	89-94	5
8, 11	78, 102-4	6
10	105-8	7

Assignments

• Required Readings: Velasquez, Chapter 2.
• Recommended Exercise: Prepare a short ethical impact statement for one of the Cases for Discussion at the end of Chapter 2.

 Summary 

Utilitarians view morality as a kind of higher economics, viewing moral reasoning on the model of economic profit-loss calculations, with the following differences:

• the "profits" and "losses" at issue are not monetary but intrinsic costs and benefits,
• the costs and benefits not just for the agent but for everyone are considered.

Utilitarians differ on how they describe the intrinsic benefits and costs to be counted.  Jeremy Bentham, the originator of the approach, spoke of "pleasure" and "pain," but his most famous formulation (the greatest happiness principle: do what results in "the greatest happiness for the greatest number") and his most famous follower (John Stuart Mill) stress "happiness” rather than “pleasure.”  Contemporary Utilitarians tend to speak, rather, of "interest satisfactions" or "preference satisfactions" as benefits and "dissatisfactions" as costs.

Utilitarianism while widely respected, is also widely held to be lacking insofar as it considers only consequences, or effects – on Utilitarian principles the ends do justify the means.  Utilitarian principles, it seems give short shrift to considerations that might override expediency: rights and justice.

Conceptions of morality emphasizing either rights and duties or fairness –justice based conceptions, for short -- view morality as a kind of higher law.  Rights can be viewed as entitlements to act in certain ways, or be treated in certain ways, without being subject to punishment or blame.  As ever, moral rights need to be distinguished from legal rights: moral rights are universal human rights; legal rights vary from jurisdiction to jurisdiction.  Every right imposes a corresponding duty on others.  On the basis of apparent differences between duties of omission and commission many recognize a further distinction between negative rights (imposing only negative duties of restraint) and positive rights (imposing positive duties of action).  This distinction figures largely in discussions of distributive justice (below).  Contractual rights and duties are "special" rights and duties arising from agreements and limited to the parties to these agreements.

It is difficult to provide a justification for claims of moral rights.  Immanuel Kant is widely recognized as having made the most noteworthy attempt.  Kant's categorical imperative asserts a universal human right to autonomy as a basis for all other rights and duties.  While Kant's attempt is open to criticism on grounds of imprecision and impracticality, perhaps the most damning objection is the "different strokes" or "heteronomy" (Kant) objection that, for evil (e.g., racist) minds, Kant's approach will license all sorts of evil: the Kantian approach only seems to require that the evildoer to practice the evil (e.g., racism) consistently for it to be morally justified.

On the one hand, justice has to do with fairness and is concerned with the comparison of the treatment given to different individuals.  On the other hand, justice and rights are connected insofar as violations of rights are considered unjust.  In either case, considerations of justice are normally taken to trump cost-benefit considerations, though sufficiently large costs and benefits are sometimes taken to trump justice back.

With regard to justice as fairness, three categories of justice are distinguished:

1. distributive justice: fair distribution of society's benefits and burdens;
2. retributive justice: fair imposition of penalties on those who do wrong;
3. compensatory justice: fair repayment for losses suffered due to others’ misconduct or mistakes.

The fundamental principle of justice that equals should be treated equally and unequals unequally can be accepted by all because it is empty of content until differences warranting different treatment are specified.  Competing conceptions of distributive justice, notably, differ on just this point.

• Egalitarian conceptions allow no distinctions and hold, consequently, that every person should be given an equal share of society's benefits and burdens: egalitarianism seems better suited to the apportionment of political benefits and burdens than economic ones.
• Contribution based conceptions of distributive justice hold that benefits should be proportional to what the individual contributes to society or the group.  Different contribution based conceptions differ on how to measure contribution.  Effort and productivity are the most commonly recognized factors.  Capitalist contribution based justice counts contribution of capital as productive.  To the pure socialist needs based principle (see below) socialist practice invariably adds "and his work,” factoring in effort.
• Needs based or ”socialist” conceptions of distributive justice propose distributing benefits according to individuals' needs for them and burdens according to individuals' abilities to bear them.  "From each according to his abilities, to each according to his needs!" (Karl Marx, Critique of the Gotha Program, 1874)

Utilitarian and justice-based approaches agree in their demand for impartiality.  Utilitarians require impartial assessment of costs-benefits and justice based approaches require impartial application of rules.  Both approaches, consequently, may be criticized on the grounds that they fail to adequately acknowledge the importance of "special duties" of partiality or care necessary for achieving and maintaining intimacy and relationships.  A related complaint is that utility and justice based approaches, by focusing on externals – on consequences (in the case of utilitarianism) and the letter of the law (for justice based approaches) – fail to adequately take account of the spirit of the act and the moral character of the agent.  Virtue based approaches seek to remedy these deficits.  Such approaches are open to criticism for being insufficient guides to action.  In institutional settings their failure to suggest any procedure for moral decision making, together with their focus on subjective estimations of character and closeness, even seem to invite wrongful sorts of favoritism such as nepotism and ethnic, religious, and other forms of discrimination.  Nevertheless, care and character based considerations point up the incompleteness of both utilitarian and justice based approaches, despite the more rigorous seeming decision procedures they seem to suggest.  Consequently, we need to weigh the relative importance of different types of considerations (of utility, fairness, rights, care, and character) in specific situations on the basis of rough criteria and subjective -- or collectively agreeable – judgments of comparative value. 

Self-Test

The following questions will help you judge your comprehension of the materials covered in Unit 2. Please remember you are responsible for the glossary terms above. You need to check your responses against the key included. 

1. Which of the following is true under the Utilitarian approach to moral evaluation?
   
   1. The course of action with the best overall cost-benefit balance is always morally best.
   2. Actions whose costs outweigh their benefits are always immoral.
   3. Actions whose benefits outweigh their costs are always moral.
   4. Both B and C.
      
2. Which of the following is a test of the morality of an act under Kant's Categorical Imperative?
   
   1. The utility of guiding policy or maxim of the act.
   2. The social acceptability of the maxim of the act.
   3. The Biblical sanction for the maxim of the act.
   4. The reversibility of the maxim of the act.
      
3. Which of the following states “the fundamental principle of distributive [and all] justice”?
   
   1. From each according to their ability.
   2. To each according to their needs.
   3. Individuals similar in all respects relevant to the kind of treatment in question should be treated similarly.
   4. Both A and B.
      
4. With regard to rights and duties, which of the following is true?
   
   1. Negative rights entail duties of commission or assistance.
   2. Positive rights entail duties of omission or noninterference.
   3. Every right entails corresponding duties.
   4. All of the above.
      
5. With regard to different categories or aspects of justice commonly distinguished
   
   1. Retributive justice has to with the fair imposition of punishments and penalties.
   2. Retributive justice has to do with the fair repayment of individuals for losses suffered due to acts of others.
   3. Retributive justice has to do with the fair distribution of benefits and burdens in society.
   4. None of the above.
      
6. Which of the following is NOT among the problems for Utilitarianism noted by Velasquez?
   
   1. It faces difficulties concerning the measurement of intangible benefits and costs.
   2. It neglects considerations of justice.
   3. It neglects considerations of efficiency.
   4. It neglects of consideration of rights.
      
7. Which of the following is true of the various theories of distributive justice discussed in the text?
   
   1. Pure “socialist justice” holds that an individual’s compensation should be based on their needs alone.
   2. “Capitalist justice” justice holds that an individual’s compensation should be based on their effort alone.
   3. Egalitarianism holds that an individual’s compensation should be based on their both their effort and their investment
   4. All of the above.
      
8. Which of the following is NOT a moral principle constraining contractual obligation?
   
   1. All parties must have full knowledge of the agreement.
   2. No party must intentionally misrepresent any relevant facts.
   3. No party must be forced to enter the agreement under duress.
   4. There must be a “grace period” of three days during which time any party may withdraw their agreement for any reason.
      
9. Which of the following is an objection to the Kantian approach that Velasquez notes?
   
   1. There are no moral standards that are absolutely true for all societies.
   2. Kantian Ethics neglects considerations of efficiency and justice.
   3. The Categorical Imperative test will wrongly judge immoral (e.g., racist) principles moral when they are applied consistently.
   4. Both A and B.
      
10. Which of the following best characterizes the overall approach to ethical valuation in general and in business contexts in particular that Velasquez advocates?
    
    1. Since Kantian, Utilitarian, and virtue based theories are all incompatible, it is essential to pick one and stick to it.
    2. Since Kantian, Utilitarian, and  virtue based theories are all incomplete, it is essential to combine them guided by rough criteria and collectively agreeable weightings of factors.
    3. Virtue based ethics should be adopted because these leave room for partiality and provide the more detailed guidance than the alternatives Kantian and Utilitarian approaches.
    4. Both A and C.
       
11. Which of the following is true of special duties such as those created by contracts and personal relations?
    
    1. They are called “special” due to their being universal and inalienable rights & duties of the whole human species.
    2. They are called “special” because they apply only to the specific individuals who are parties to the contract or relation.
    3. They are called “special” because they are they are absolute or categorical duties admitting no exceptions.
    4. They are called “special” because they are so indispensable to the conduct of business (in the contractual case) and society (in the personal case).

Self-Test Key

Question	Answer	Objective	Pages
1	A	1	61-2
2	D	3	78-80
3	C	4	89
4	C	2	74-5
5	A	4	88
6	C	1	64-71
7	A	5	89-94
8	D	6	78
9	C	3	82-3
10	B	7	105-8
11	B	6	102-4

NOTE:  The questions on the module end examination will be closely based on the self-test you have just taken.  Often, the examination will even repeat the question-part of self-test questions while varying the answers and distracters (A, B, C, D) choices.  For example, question 11 above might appear instead with this set of options –

1. They seem contrary to Kantian requirements of impartiality in the application of rules.
2. They seem contrary to Utilitarian requirements of impartiality in the weighing of consequences.
3. They are called “special” because they apply only to the specific individuals who are parties to the contract or relation.
4. All of the above.

– making “All of the above” (D) the correct answer.

CONSEQUENT ADVICE:  The self-test questions can be very useful for studying for the module end examination, but only if used in the right way.  As the example above shows it would not have been completely availing to have studied for the exam by memorizing that the answer to the one about special duties was “they’re `special’ meaning specific” since additional true answers added made “All of the above” the best answer.  Nevertheless it will have been of some use, since ½ credit will be given for true answers which are not best or “the whole truth.”  The following points are noteworthy in this connection:

• If you knew the answer to the self-test item cold – you weren’t just guessing – you probably know enough to answer the corresponding module end examination question.  Probably, but not assuredly, the current example shows.
• To the extent that your were guessing – even if you got the self-test answer right – you probably need further study on this item.

In taking the module end examination it is extremely important that you read the examination questions and options carefully: a little word like not or and can make all the difference between a right and a wrong answer.  Pay attention to italicized words and phrases – italics are for emphasis and often provide clues to the questions being asked and the answers being sought.