Classical Approaches to Business Ethics - Essay Example

Compare and contrast the standard ical approaches to business ethics, the intelligent self interest approach, and the rational choice approach.”Business Ethics is composed of number of philosophies, which intent to state on behalf of the local communities, people and natural well-beings in order to bring benefits to them. There are number of theories and philosophies, which put forward their own point of view. A large number of similarities can be found among these theories but despite of it, they often tend to contradict each other. Some of the most commonly prevalent theories are discussed in this paper. The discussion has been done based upon the commonalities and differences, which are found among them. Utilitarian Theory Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873) first put forward the concept of Utilitarian Theory or Utilitarianism. According to these philosophers, “Actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness.” In short, Utilitarian Theory emphasizes on bringing ‘greatest good for greatest number of people.’ This theory seems to be a good idea to support, but in practice, just like other ethical codes, it too has many flaws. For bringing greatest good for greatest number of people, it must be ensured that every member has severely good intentions and would need to have a burning desire to provide this good to even more number of people. This theory has some similarities with Duty and Virtue Theory for instance, Duty and Virtue Theory states that the act of virtuous person must be considered and not of that person who does evil deeds. Therefore, this theory, too, does not have room for those people who possess purely evil intentions. Utilitarian Theory also supports the idea of Stakeholder Theory. Since stakeholders are usually in a large number i.e. large number of customers, employees, suppliers, communities etc, therefore companies must ensure that all these stakeholders are benefited with the decision of the company. In other words, this theory is an example of Utilitarian Theory in practice. Opponents believe that this theory does not hold adequate rights for individuals since everything cannot be measured in the same standards. Moreover, happiness is more intricate than reflected by philosophies and theories. In this way, this theory contradicts with Rational Choice Theory. A thing that is seen and considered as a source of happiness might not have the same meaning and value in eyes of another person. Utilitarian Theory supports the philosophy, which is put forward by Corporate Citizenship. If correct decisions are taken at the level of Board of Directors, then it can lead to greatest good for greatest number of people. If the executives take unethical and illegal decisions, since the society and stakeholders are not monitoring them, then it can lead to loss of concern of stakeholders. If people grasp the concept of Enlightened Self Interest Theory, then they would never hesitate to implement Utilitarian Theory. If people understand that if they do good to others, then this good will ultimately serve them as well. This phenomenon can be a basic criterion for the mechanism of Utilitarian Theory. Duty and Virtue Theory Duty and Virtue Theory is popularly known as Virtue Ethics Theory. Virtue Ethics Theory focuses on the person who is carrying out the action, rather than the action itself. It is also called as ‘character based ethics’. As a wise said, “A right act is the action a virtuous person would do in the same circumstances” Duty and Virtue Theory is similar to Utilitarian Theory because in both these theories, there is no room for evil thoughts and evil deeds. Despite of this similarity, it cannot be compared completely with Utilitarian Theory because this theory states that in order to judge an action the character of the doer must be considered. Duty and Virtue Theory has no direct linkage with Stakeholders Theory. Both of these are two different concepts. Stakeholder Theory states that the benefits and rights of stakeholders must be preserved, whereas Duty and Virtue Theory focuses on the character of the person who is performing an action. Corporate Citizenship focuses on the corporate executives who are responsible for taking ethical and legal decisions. Duty and Virtue Theory can be linked with Corporate Citizenship because if executives of good character and virtues are selected for placing in Board of Directors, then definitely they will be taking ethical decisions only. They will stand against those decisions, which can become a cause of harm for community or people. Duty and Virtue Theory can be compared with Rational Choice Theory because people tend to take those decisions that are in their favor or will produce greater benefits to them. Therefore, there is a possibility that if a person is in ethical dilemma about whether he should go for community benefits or personal profitability, then he will go for personal profitability. Duty and Virtue Theory states that if a person is virtuous, then he will support community benefits at the expense of his personal profits. Duty and Virtue Theory cannot be linked directly with Enlightened Self Interest Theory because this theory emphasize upon the fact that if one person does a good deed which is favorable for others, then consequently he will also reap its benefits. Duty and Virtue Theory emphasize upon the character of the doer, so if the person is virtuous and intends to do good deeds for others, ultimately he will be benefited by that but we also see real life example that a bad character person who intends to harm others, ultimately gets harmed by his own evil planning and doings. Stakeholder Theory From Business Ethics point of view, this theory states that the purpose of a business is to create maximum value for its stakeholders. Stakeholders are referred to as all those entities, which are affected by the decision of business, directly or indirectly. For a company, stakeholders can be its suppliers, customers, employees, shareholders, communities, natural well-beings etc. Executives must ensure that the interests of these prior mentioned stakeholders are aligned in the same direction. Comparison between Utilitarian Theory and Stakeholder Theory has already been mentioned earlier. If a company intends to implement the idea of providing benefit to its entire stakeholders, then somehow it is implementing Utilitarian Theory, which says greater good for greater number of people. As mentioned earlier, Duty and Virtue Theory has no direct linkage with Stakeholders Theory. Both of these are two contrasting philosophies. Stakeholder Theory focuses on the rights and benefits of stakeholders, whereas Duty and Virtue Theory emphasize upon the character of the person who is performing an action. Stakeholder Theory is deeply rooted with another philosophy, which is Corporate Citizenship. Corporate Citizenship says that at corporate level, companies must take the responsibility of taking those decision which are ethical, legal and economic or in other words, do not harm the rights and benefits of stakeholders. Stakeholder Theory and Rational Choice Theory can be compared in a way that the rational choice of a decision-maker must be aligned with those decisions, which are in the interest of stakeholders. In order to maximize benefits, which is usually a rational choice of businesses; companies must not ignore the stakeholders associated with those decisions. Stakeholder Theory contrasts with Enlightened Self Interest Theory, because practically it is not feasible that each person has same standards of living and tries to work for the benefit of others. In this regard, Stakeholder Theory and Enlightened Self Interest Theory cannot be compared on common grounds. Corporate Citizenship Corporate citizenship is defined as the extent to which executives are responsible socially for meeting ethical, legal and economic responsibilities, which shareholders have placed on them. The objective of every business is to create better standards of living and superiority of life for the societies in which they operate, while conserving profitability for their shareholders. Corporate Citizenship Theory can be compared with Utilitarian Theory in a way that if executives of every company focuses on taking those decisions, which will have the concept of greater good for greater number of people, irrespective of it that what amount of profit they are making, then there are greater chances of peaceful communities. As mentioned earlier, Corporate Citizenship can be compared with Duty and Virtue Theory in a way that virtuous and right morale executives are selected for top management, and then there are substantial chances of having less unethical and illegal activities in our day-to-day business activities. For Stakeholder Theory, Corporate Citizenship matters a lot. The top management needs to take into account all the possible stakeholders and must pursue for their protection and benefits. Corporate executives must not get blind in making profits only but should also take care of environment, its well-beings etc. In today’s businesses, a rational choice of every business is to maximize its profits as much as it can. The philosophy of this theory and Corporate Citizenship is more or less same since the rational choice of every business is to maximize profits. Enlightened Self Interest Theory can be compared with Corporate Citizenship because if the top management works for the benefits of other entities along with their own business, then ultimately it will benefit the company in the form of better brand image, social responsible company, repeat purchase of its products, higher sales turnover etc. Rational Choice Theory This theory revolves around an economic principle, which assumes that individuals make logical, rational and prudent decisions, which provides them maximum satisfaction or benefits and these decisions are in their higher self-interest. A large number of conventional economic theories and assumptions revolve around the concept of Rational Choice Theory. According to Thomas Aquinas,  “A man has free choice to the extent that he is rational.” Rational Choice Theory can be compared with Utilitarian Theory as long as individual make rational choice of providing greater good for greater number of people. A detailed discussion about the comparison between Rational Choice Theory and Utilitarian Theory has already done earlier. Rational Choice Theory is deeply rooted with Duty and Virtue Theory. A large number of rational decisions, which an individual takes, are based upon their characters. While facing an ethical dilemma, a virtuous person would try to work for the benefit of greater number of people at the expense of his own personal benefit and vice versa. Stakeholder Theory is compared with Rational Choice Theory in a way that rational choices of decision maker must be aligned with the rights and benefits of relevant stakeholders. Corporate Citizenship and Rational Choice Theory have already been compared earlier. The rational choice theory has few assumptions, which include: Human are goal oriented and purposive. Human possess set of utilities and ordered preferences. While choosing from different behavior, a rational person selects the one, which maximizes utility (Jonathan Turner 1991, The Structure of Sociological Theory, p. 354). These assumptions clearly state that at corporate level, there are greater chances of taking decision, which are of self-interest. In short-run, it might benefit a business but in long run, it will hamper the organization’s reputation. Rational Choice Theory and Enlightened Self Interest Theory can be compared in a way that if people think that benefitting others will ultimately benefit them then they will take rational decision of taking those decisions, which are in others’ interest. Rational choice theory happens to be in our day-to-day life. In our day-to-day life, we take decisions, which seem rational and logical to us and which provides maximum utility to us. Considering all the other ethical philosophies can help decision takers and policy makers in taking better decisions and making better policies, which provide benefit to a large number of people. Despite of the fact that similar standards cannot be set yet a substantial amount of effort can make a difference. Enlightened Self Interest Theory Enlightened Self Interest Theory states that a person, who acts for the benefits and interests for other people, groups, communities, etc, ultimately serves his own interest. Some commentators argue that businesses exist solely to make their own profits while others suggest that businesses are responsible to other stakeholders, which include customers, suppliers, employees and societies within which they operate. According to Franklin D. Roosevelt, “The virtues are lost in self-interest as rivers are lost in the sea.” Earlier, Enlightened Self Interest Theory and Utilitarian Theory have already been compared. Despite of such comparison, these theories hold certain limitations. A hint of such limitations has also been discussed earlier, for instance it is not at all possible that each person of the group has virtuous heart and mind. There is large number of evil-minded people present in our society, which holds themselves and others back. Enlightened Self Interest Theory and Duty and Virtue Theory can also be compared in order to resolve conflicts. If an action has to be judged, then it must be judged based upon the person who is doing that action. If the person is good, then there are greater chances that the action will also be good. This good will come back to him if he is doing that for the sake of general people. Enlightened Self Interest Theory and Stakeholder Theory are contrasted in a way that each stakeholder holds different set of mind and therefore performs different activities. Enlightened Self Interest Theory and Corporate Citizenship have also been discussed earlier. That discussion encompasses that top management needs to be virtuous enough to take better decision. In the long-run, ultimately they will reap benefits of the good they will be doing for their stakeholders. According to Voltaire, “We are born unjust, for each of us is out for himself. That is against all order. We should work for the general good, and the tendency towards self-interest is the beginning of all disorder, in warfare, government, economy, etc” Enlightened Self Interest Theory and Rational Choice Theory can be compared by considering Duty and Virtue Theory. In today’s businesses, it is essential to keep virtuous top management in every company and in every sector so that the overall entities are benefited by it. Works Cited Audi, R. (2008). Business Ethics and Ethical Business. New York: Oxford University Press. Ethical Theory. (n.d.). Retrieved from: http://webteach.mccs.uky.edu/profdent/ethical_theory2.htm Ferrell, O. C, Fraedrich, J. and Ferrell, L. (2012). Business Ethics: Ethical Decision Making & Cases. New York: Cengage Learning. Kubasek, N. K., Brennan, B. A. and Browne, A. N. (2011). The Legal Environment of Business: A Critical Thinking Approach. Chicago: Prentice Hall Turner, J. H. (1982).The Structure of Sociological Theory. Chicago: Dorsey Press. Werther, W. B. and Chandler, D. (2010). Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. New York: SAGE. Read More