Ethics Theories and the Competing Values Framework
Management theory and practice implicitly endorse some ethical values over others and this provides the basic ethical orientation of managers. But managers have to understand different ethical theories to find out best for a particular situation
“Ethics can be defined as the systematic attempt to make sense of individual, group, organizational, professional, social, market, and global moral experiences in such a way as to determine the desirable, prioritized ends that are worth pursuing, the right rules and obligations that ought to govern human conduct, the virtuous intentions and character traits that deserve development in life, and to act accordingly. Put more simply, ethics is the study of individual and collective moral awareness, judgment, character, and conduct.” Researchers propose three types of ethics namely, descriptive, normative and analytical.
There are a number of ethical theories. All these theories can be exhibited in four quadrants in the figure below:
Teleological Ethics Theories
Teleological ethics theories proposes that beneficial ends and/or results determine the ethical value of actions. If, on balance, any action provides more benefits than costs to the relevant stakeholder (s) than by any other alternative, teleological ethics endorses the goodness of that choice. Three major types of teleological ethics are eudaimonism, utilitarianism, and egoism.
Ethical egoism, is a teleological theory that holds that an action is good if it produces or tends to produce results that maximize a particular person’s self-interest as defined by the individual, even at the expense of others. Ethical egoism discourages a person to help others when the person gets nothing out of it.
Enlightened egoism emphasizes long-range self-interest simultaneously endorsing altruistic concern for the well being of others. An enlightened egoist, for example, may well avoid cheating and support community projects, not so much because these actions benefit others, but because they help achieve some ultimate goal for the egoist, such as social image enhancement that could lead to carrier advancement within an organization.
Principle of Utilitarianism proposes that an action can be considered as right only if the action produces most utility for all the people affected by the action. Utilitarianism principle holds that the action whose net benefits are greatest relative to the net benefit of all other alternative actions. Both future as well as immediate costs and benefits are taken into consideration in this principle.
Utilitarians have come up with an alternate version of the principle of Utilitarianism called rule – utilitarianism. According to this, an action is ethically right, if the actions would be required by moral rules which are correct. A moral rule is correct if the sum total of the utilities produced is greater than sum total of utilities produced if everyone follows an alternative rule. Rule Utilitarianism is applicable to a great extent to an organizational context. In an organizational situation, according to Rule – Utilitarianism the correct moral rule is the one that would produce greatest utility for everyone affected.
Eudaimonism or Theories of Happiness
Eudaimonism is a teleological theory that endorses a course of action if it promotes or tends to promote the fulfillment of goals relating to human nature and its happiness. For example, this theory says that a manager enforces employee health and safety standards at work to ensure that employees derive happiness and satisfaction out of it.
This theory is based on the premise that when a choice has to made between having a good time (maximizing pleasurable utility) and leading a good life (maximizing happiness) and the latter outcome was to be preferred to the former.
Deontological Ethics Theories
Deontological ethics theories maintain that responsibly fulfilling obligations, following proper procedure, “doing the right thing”, and adhering to moral standards determine the ethical value of actions.
Deontological ethics maintains that irrespective of the consequences of an action, an action is ethical if it is morally right. Among the major types of deontological ethics are negative and positive rights theories, social contract theories, and social justice theories.
Negative and Positive Rights Theories
Negative rights theories hold that an action is right if it protects an individual from unwarranted interference from government and/or other people in the exercise of that right; for example, if a person has a right to privately use, sell, or dispose of his personal property as he chooses, this means that every other person has the correlative duty not to prevent him from privately using, selling, or disposing of his property as he freely chooses.
Positive rights theories hold that an action is right if it provides any individual with whatever he or she needs to exist. For example, if he has a right to adequate health care to survive, this means that other agents (perhaps the government) have the correlative duty to provide him with entitled adequate health care, not merely to avoid interfering with its competitive acquisition.
Social Contract Theories
Social contract theories hold that an action is right if it conforms to the terms agreed upon, conditions, or rules for social well-being negotiated by competent parties.
Social Justice Theories
Social justice theories hold that an action is right if it promotes the duty of fairness in the distributive, retributive, and compensatory dimensions of social benefits and burdens. For managers, this approach stresses monitoring adherence to standard operating procedures and rewarding persons for adhering to contractual agreements in a coordinated manner.
Virtue Ethics Theories
Virtue ethics theories maintain that habitual development of sound character traits determines the ethical value of persons. For the virtue ethicist, sound, balanced character, motivation, and intention of an individual is more important than the person’s actual conduct and its consequences. Three major types of virtue ethics theories focus on individual, work, and professional character which defines the required characteristics of the character of an individual or work or professional.
System Development Ethics Theories
System development ethics theories maintain that the ethical value of actions is determined by the nature and extent of the supportive framework for continuous improvement of ethical conduct. Managers should assess and develop work cultures supportive of ethical conduct.
Ethical problems faced by Personnel Managers:
The ethical issues faced by individual employees and managers are very different, since managers are responsible for the entire range of human resources activities such as hiring, firing, disciplining, and performance evaluation. A large number of the ethical issues that arise in business are human resources related and these can usually be addressed by local managers, who act quickly, fairly, and with compassion.3
Hiring and Work Assignments:
A manager hires, or brings new people into the organization, and determines employee work assignments once employees are on the job. The new people may be permanent employees, or they may be part -time employees, temporary workers, or consultants.
Many times performance evaluation is not done objectively but is based on the relationship of the executive with his appraiser. This defies the entire purpose of Performance Appraisal System which should ensure that a fair and transparent appraisal is done. This kind of favoritism may lead to demotivation of star performers and sends a bad signal in the company.
One good way to ensure continuous performance evaluation is to establish a formal appraisal system where performance of an employee is measured continuously and through quantifiable parameters. By measuring the objectives and targets are quantifiable and objectively measured, the process becomes fair and ethical. An ongoing process can greatly reduce misunderstanding, resentment, and charges of discrimination or bias.
Termination done in any form is never pleasant and should be avoided at all times but at times management is faced with no choice but to terminate the employees. Layoffs can result from many kinds of reorganizations such as mergers, acquisitions, relocations, or as the result of economic reasons, or changes in business strategy. A layoff can stem from a decision to trim staff in one department, or from a decision to reduce head count company-wide. 4
There are steps a manager can take to make it easier for the employee being terminated. The main goals are to be fair, ethical and to allow the employee to maintain personal dignity. Manager should ensure that this step is taken as a last possible resort and if it is inevitable, manager should ensure that the employee is given sufficient notice to get a new job or come up beneficial schemes like voluntary requirements. Also, it would be more beneficial if management engages outplacement counselors or human resources professionals to meet with people who are laid off.
Managing workforce diversity
Managers are often placed with ethical issues of discrimination and unfair favoritism on the basis of the society and community that the employee belongs to. It is important for a manager to discourage any kind of bias based on religion, community and gender.
Importance of Ethics in Business context – Enron Scandal
Enron Scandal – a saga of how the truth unfolded and the one-time most reputed business of America went into trash. As the Consequential Theory of Utilitarianism says, an act is ethical or morally right only if the consequences of that action are more favorable than unfavorable to everyone. As in the case of Enron, it can be seen that whatever the top management did was favourable to only a bunch of officials while the sufferers were the stakeholders in the form of shareholders, employees, financial institutions, accounting firms etc. Also later, when the mask was off, all the culprit officials were penalized and punished which proves that truth can’t be hidden for long. And the short-term benefit is too short when compared with long-term cost which one has to pay for its unethical acts. 
Enron entered into a range of shady dealings, including concealing debts so they didn’t show up in the company’s accounts. This can be justified as according to the Normative Principle in Applied Ethics which talks about the “Right to information”. Enron lied about its profits as during its heyday from 1999 to 2000, the company reported very strong net income by dubious accounting exercises. But the actual amount of cash that Enron’s businesses generated wasn’t nearly as impressive. Wrong information is more catastrophic than no-information. This can be justified as according to the Normative Principle in Applied Ethics which talks about the “Principle of honesty” which says that one shall not deceive others.
Insider Trading refers to the process where a person is in hold of certain information due to one’s position in the organization and he uses it for his own advantage. Insider trading is both illegal and unethical. Enron CEO Ken Lay had been consistently selling Enron stock in 2001.
Top management promoted Enron shares as a bargain to employees and linked all their pension plans to the same. These employees had lost up to 90 percent of their 401(k) retirement savings as Enron’s shares trashed into ground. As per principle of Principle of Paternalism, one should assist others in pursuing their best interests when they cannot do so of themselves. In this case, employees were ignorant of the fact as to what was the company doing, moreover, they were ignorant of best practices so they relied on the advice of their CEO to invest in stocks.
The collapse of Enron has made it clear that no matter how much profit an organization makes in short-run, for its survival in the long-run, it has to stick to the policies of ethical practice. Any organization that deviates from this, will suffer in the long-run. A manager would invariably be faced with ethical dilemmas in the daily working of an organization but he or she should not endorse unethical practices since it would harm the organization in the long run and no organization can sustain in long term on unethical practices and policies.
1. Joseph A. Petrick & John F. Quinn, (1997), Management Ethics: Integrity at Work, Sage Publications, Sage series in Business Ethics.
2. Ken Blanchard, Ch. 8. Managing by Values, P.33-36, in Integrity at Work, Edited by Ken Shelton, Executive excellence publishing, 1998.
3. Ken Blanchard, Ch. 8. Managing by Values, P.33-36, in Integrity at Work, Edited by Ken Shelton, Executive excellence publishing, 1998.
4. Willlmot Hugh, “Contributions of Poststructuralism and Posthumanism”, Ethics & Organization, Sage Publications, 1998, Pg. 76 -121
5. Hart, O. , 1995, Corporate Governance: Some Theory and Implications, The Economic Journal 105, 678-689.
6. Retrieved from http://www.ethics.org/
 Joseph A Petrick & John F. Quinn, Management Ethics: Integrity at Work, Sage Series on Business Ethics , 1997, p.43.
 Ibid, p. 48
 Ken Blanchard, Ch. 8. Managing by Values, P.33-36, in Integrity at Work, Edited by Ken Shelton, Executive excellence publishing, 1998.
 Willlmot Hugh, “Contributions of Poststructuralism and Posthumanism”, Ethics & Organization, Sage Publications, 1998, Pg. 76 -121
5 Hart, O. , 1995, Corporate Governance: Some Theory and Implications, The Economic Journal 105, 678-689.