Ethical Theories in Business

by Scott Thompson

Business leaders make ethically significant decisions every single day, and they always do so according to some theory of ethical behavior whether they think of it that way or not. A basic understanding of the most important ethical theories can help a business owner think clearly about ethical problems and make well-informed decisions.
Self-Interest, Enlightened or Otherwise
Strong believers in laissez-faire capitalism often argue that business decisions should be made solely on the basis of self-interest to the extent allowed by the law. In most personal interactions, this type of behavior would be seen as unethical, but champions of free market economics argue that self-interested behavior produces wealth and creates new jobs. Because a business leader has no way of knowing which altruistic actions would most benefit society as a whole, the best way he can contribute to society is by doing whatever benefits his own business. This theory of business ethics could be used to justify nearly any business decision. However, enlightened self-interest is a variation of the theory based on the idea that self-interest can lead to the same decisions as altruism in some circumstances. For instance, a business owner who implements a sustainability program may save money by reducing expenses.
Duty to Principles or People
A pure free market economy is a hypothetical concept, as real markets are always subject to regulations and restrictions. Most business ethics theorists accept the idea that a business leader may have some ethical obligations beyond self-interest. However, much debate exists about who or what the business leader might be obligated to. If a company has investors or stockholders, the business owner has a legal duty to act in their financial interest. Some would argue that he also has an ethical duty to operate in the best interests of the community, the environment, his employees or other stakeholders. Some business leaders consider themselves to have a personal duty to uphold moral principles they believe in, such as religious teachings.
Compassion and Consequence
Theories of ethics based on abstract moral principles have been criticized by some thinkers for neglecting the question of human compassion. No business based solely on compassion could succeed financially, but that doesn’t mean compassion should never be a factor in ethical decision-making. A doctor who sees a needy patient without charging for services or a business owner who hires a troubled teenager to give him a second chance could be seen as acting with compassion. Another way to look at ethical problems is to think about the potential consequences of a particular course of action. Business practices that create environmental problems might bring an immediate benefit for stockholders, but with serious long-term consequences.
Virtue and Vice
Virtue ethics is an ancient ethical theory that has made a comeback in recent years. A practitioner of virtue ethics tries to act so as to embody certain virtues such as honesty or courage, while avoiding vices such as dishonesty or cowardice. In real-world decision-making, no ethical theory is sufficient for all situations. The best approach is to examine each situation according to all the major ethical theories. For instance, before making a major decision, a business leader could ask himself several questions about his planned course of action. Is it in the best interests of the company? Does it fulfill the duty to act in the interests of investors or stockholders? What is the likely impact on the community, employees and the environment? Any decision made after thoughtfully considering these questions is likely to be an ethical one.

Original article in: Chron