Business ethics and corporate social responsibility

CPA-Business-Law-Section-1 BLOCK RELEASE

In the recent years, nation have been surprised a number of major corporate scandals triggering widespread public skepticism, shock among other behaviors towards the executives who run them. Such tend to range from inflating profits, obstruction of justice, manipulating the market, etc.
In most business set ups, it would appear, when a behavior has a direct identifiable price, it is much easier to motivate corporate behavior. However;

1. Should corporate managers consider moral choices or should their focus be based on profit and loss
2. In a world of ever increasing complexity and interdependency, how does one go about determining what conduct is or is not ethical


Let us look at four ethical theories in relation to the above questions. The theories are; rights theory, justice theory, utilitarianism, and profit maximization. The rights theory is also referred to as deontological ethical theory since it focused on the actions and process and not just consequences. The other three which focus on the consequences of an action are teleological ethical theories.

Rights theory
This is based on the view that certain human rights are fundamental and should be observed. This therefore means that its primary focus is on individuals in society. There are two primary category of rights theory 1) Kantianism 2) The modern rights theory
Immanuel Kant was a strict deontologist. He viewed humans a moral actors free to make choices. According to this philosopher morality of a given action was determined applying categorical imperative, that is, judge an action applying it universally. For instance if you are to steal then the question is, are you will to let everyone steal freely? Since this threatens your future security then you may conclude that stealing is wrong.

Modern right theories
One major problem with Kantianism is that it imposes duties to be absolute. This implies that lying or killing for instance would be perceived to be unethical. Modern theorist believes that there may be circumstances when action like lying and killing could be morally acceptable for instance self defense. One popular theory believes that you should abide a moral rule unless a more important rule conflicts with it, that is, our moral compulsion is not to compromise a person’s right unless a greater right takes priority over it.
Due to this moral relativism, modern rights theorists have choices to make. They must determine what the fundamental rights are and how they are ranked in importance. Most courts tend to use this approach.
Justice theory
This is derived from John Rawls’s book A Theory of Justice, which argued for just distribution of society’s resources. This can be referred to as a fair allocation of society’s benefits and burdens among all members of society.

Rawls argues that self-interested rational persons behind the veil of ignorance would choose two general principles of justice to structure society in the real world:

1. Principle of equal liability- each person has equal right to basic rights and liberties.
2. Difference principle- social inequities are only acceptable if they cannot be eliminated without making the worst-off class even worse off.
Under the justice theory, the decision makers’ choices are to be guided fairness and impartiality, however, the focus in on the outcome of the decision.
Consider a company that has two choices in terms of production, that is, produces locally or outsource, based on this theory the company can choose to outsource assuming the workers in the other country are badly off than the local workers.

This derived from the workings of Jeremy Bentham and John Stuart Mill. Under utilitarianism, an ethical decision is one that maximizes utility for society as a whole. Thus, in our individual decision we should always calculate their costs and benefits for every member of society. An action is ethical only if the benefits to society outweigh their costs. This means that at times decision makers have to sacrifice their own interest if doing so gives greater benefit to society.

Profit maximization
This is a teleological theory that is based on the laissez faire theory of capitalism championed Adam Smith.
It proposes that managers should managers should maximize a business’s long run profits within the limits of law. Unlike utilitarianism, in profit maximization the managers focus solely on those decisions result into more profits for the organization.

Critics view this to be entirely untrue since in the quest for more profit other issues such as employees’ welfare could be ignored.

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