The proper role of ethical reasoning is to highlight acts of two kinds:
1. those that enhance the well-being of others—that warrant our praise and
2. those who harm or diminish the well-being of others—and thus warrant our criticism.
Developing one’s ethical reasoning abilities is crucial because there is in human nature a strong tendency toward egotism, prejudice, self-justification, and self-deception.
Ethical reasoning helps determine and differentiate between right thinking, decisions, and actions and those that are wrong, hurtful and/or harmful—to others and to ourselves.
Ethics is based on and motivated by values, beliefs, emotions, and feelings as well as facts.
Ethical actions also involve conscientious reasoning of facts based on moral standards and principles.
Business ethics refers to applying ethical reasoning and principles to commercial activities that are often profit-oriented.
Three Criteria in Ethical Reasoning
The following criteria can be used in ethical reasoning. They help to systematize and structure our arguments:
1. Moral reasoning must be logical. Assumptions and premises, both factual and inferred, used to make judgments should be known and made explicit.
2. Factual evidence cited to support a person’s judgment should be accurate, relevant, and complete.
3. Ethical standards used in reasoning should be consistent. When inconsistencies are discovered in a person’s ethical standards in a decision, one or more of the standards must be modified.
5 Ethical Principles
The principles are: (1) utilitarianism, (2) universalism, (3) rights, (4) justice, and (5) ethical virtue.
|Belief Systems||Source of Moral Activity||Stakeholder Analysis Issues|
|Utilitarianism (Calculation of Costs and Benefits)||Moral authority is determined by the consequences of an act: An act is morally right if the net benefits over costs are greatest for the majority. Also, the greatest good for the greatest number must result from this act.||1. Consider collective as well as particular interests.|
|2. Formulate alternatives based on the greatest good for all parties involved.|
|3. Estimate costs and benefits of alternatives for groups affected.|
|Universalism (Duty)||Moral authority is determined by the extent to which the intention of an act treats all persons with respect. Includes the requirement that everyone would act this way in the same circumstances.||1. Identify individuals whose needs and welfare are at risk with a given policy or decision.|
|2. Identify the use or misuse of manipulation, force, coercion, or deceit that may be harmful to individuals.|
|3. Identify duties to individuals affected by the decision.|
|4. Determine if the desired action or policy would be acceptable to individuals if the decision were implemented.|
|Rights (Individual Entitlement)||Moral authority is determined by individual rights guaranteed to all in their pursuit of freedom of speech, choice, happiness, and self-respect.||1. Identify individuals and their rights that may be violated by a particular action.|
|2. Determine the legal and moral basis of these individual rights.|
|3. Determine the moral justification from utilitarian principles if individuals’ rights are violated.|
|Justice (Fairness and Equity)||Moral authority is determined by the extent opportunities, wealth, and burdens are fairly distributed among all.||1. If a particular action is chosen, how equally will costs and benefits be distributed to stakeholders?|
|2. How clear and fair are the procedures for distributing the costs and benefits of the decision?|
|3. How can those who are unfairly affected by the action be compensated?|
|Virtue Ethics (Character-Based Virtues)||Moral authority is based on individual character virtues such as truthfulness, integrity, and honesty. An act, policy, strategy is moral if it reflects these types of virtues.||1. What are the “character virtues” of the individual stakeholder(s), the policy, procedure, or strategy in question?|
|2. If a particular action, policy, strategy is chosen, to what extent will these virtues be evident, or missing?|
|3. While seeking a mutually desirable outcome in a conflicting situation, how can conflicting character values and characteristics that are embedded and/or reflected in a decision, policy, or strategy be avoided or negotiated?|
Utilitarianism: A Consequentialist (Results-Based) Approach
Because businesses use utilitarian principles when conducting a stakeholder analysis, you, as a decision maker, should:
1. Define how costs and benefits will be measured in selecting one course of action over another—including social, economic, and monetary costs and benefits as well as long-term and short-term costs and benefits. On what principle, if any, would you use to base your utilitarian analysis?
2. Define what information you will need to determine the costs and benefits for comparisons.
3. Identify the procedures and policies you will use to explain and justify your cost-benefit analysis.
4. State your assumptions when defining and justifying your analysis and conclusions.
5. Ask yourself what moral obligations you have toward each of your stakeholders after the costs and benefits have been estimated.
Universalism: A Deontological (Duty-Based) Approach
The logic underlying universalism and the categorical imperative can be helpful for applying a stakeholder analysis. Even though we may not be able to employ Kant’s principles absolutely, we can consider the following as guidelines for using his ethics:
1. Take into account the welfare and risks of all parties when considering policy decisions and outcomes.
2. Identify the needs of individuals involved in a decision, the choices they have, and the information they need to protect their welfare.
3. Identify any manipulation, force, coercion, or deceit that might harm individuals involved in a decision.
4. Recognize the duties of respecting and responding to individuals affected by particular decisions before adopting policies and actions that affect them.
5. Ask if the desired action would be acceptable to the individuals involved. Under what conditions would they accept the decision?
6. Ask if individuals in a similar situation would repeat the designated action or policy as a principle. If not, why not? And would they continue to employ the designated action?
Rights: A Moral and Legal Entitlement-Based Approach
The principle of rights is particularly useful in stakeholder analysis when conflicting legal or moral rights of individuals occur or when rights may be violated if certain courses of action are pursued. The following are guidelines for observing this principle:
1. Identify the individuals whose rights may be violated.
2. Determine the legal and moral bases of these individuals’ rights. Does the decision violate these rights on such bases?
3. Determine to what extent the action has moral justification from utilitarian or other principles if individual rights may be violated. National crises and emergencies may warrant overriding individual rights for the public good.
Justice: Procedures, Compensation, and Retribution
In a stakeholder analysis, the principle of justice can be applied by asking the following questions:
1. How equitable will the distribution of benefits and costs, pleasure and pain, and reward and punishment be among stakeholders if you pursue a particular course of action? Would all stakeholders’ self-respect be acknowledged?
2. How clearly have the procedures for distributing the costs and benefits of a course of action or policy been defined and communicated? How fair are these procedures to all affected?
3. What provisions can be made to compensate those who will be unfairly affected by the costs of the decision? What provisions can we make to redistribute benefits among those who have been unfairly or overly compensated by the decision?
Virtue Ethics: Character-Based Virtues
Virtue ethics adds an important dimension to rules and consequentialist ethics by contributing a different perspective for understanding and executing stakeholder management. Examining the motives and character of stakeholders can be helpful in discovering underlying motivations of strategies, actions, and outcomes in complex business and corporate transactions. With regard to corporate scandals, virtue ethics can explain some of the motives of several corporate officers’ actions that center on greed, extravagant habits, irrational thinking, and egotistical character traits.
Virtue ethics also adds a practical perspective. Beauchamp and Childress state, “A practical consequence of this view is that the education of, for example medical doctors, should include the cultivation of virtues such as compassion, discernment, trustworthiness, integrity, conscientiousness as well as benevolence (desire to help) and nonmalevolence (desire to avoid harm).” These authors also note that “persons of ‘good character’ can certainly formulate ‘bad policy’ or make a ‘poor choice’—we need to evaluate those policies and choices according to moral principles.”