Why This Matters
When you face an ethics question on the exam, you're not just being asked to define terms—you're being tested on your ability to apply different ethical frameworks to real business scenarios. These theories represent fundamentally different ways of answering the question "What makes an action right or wrong?" Some focus on outcomes, others on rules, and still others on character or relationships. Understanding these distinctions is what separates a surface-level answer from one that demonstrates genuine analytical thinking.
The theories covered here connect directly to topics you'll encounter throughout the course: corporate governance, stakeholder management, whistleblowing dilemmas, environmental responsibility, and global business practices. Don't just memorize definitions—know what each theory would say about a given situation, where theories conflict, and which framework best addresses specific types of ethical problems. That's how you'll tackle case studies and FRQs with confidence.
Outcome-Based Theories
These frameworks evaluate actions primarily by their results. The moral worth of a decision depends on what it produces, not on the intentions behind it or the rules it follows.
Utilitarianism
- Greatest good for the greatest number—this principle drives all utilitarian analysis, requiring you to weigh total benefits against total harms across all affected parties
- Consequence-focused evaluation means intentions don't matter; a well-meaning decision that causes widespread harm is still ethically wrong under this framework
- Cost-benefit analysis in business often reflects utilitarian thinking, making this theory central to understanding corporate decision-making processes
Consequentialism
- Umbrella term for outcome-based ethics—utilitarianism is the most famous type, but any theory judging actions by results falls here
- Challenges rule-based thinking by asking whether following a rule still makes sense if it produces worse outcomes in a specific situation
- Flexibility and risk are both features: consequentialism adapts to circumstances but can justify harmful actions if the ends seem to justify the means
Ethical Egoism
- Self-interest as moral guide—argues that individuals should pursue their own good, distinguishing it from psychological egoism (the claim that people naturally do)
- Adam Smith connection often appears in business contexts, linking to the idea that self-interested market behavior can produce collective benefits
- Personal vs. universal forms matter: personal egoism says "I should pursue my interests," while universal egoism says "everyone should pursue their own interests"
Compare: Utilitarianism vs. Ethical Egoism—both focus on outcomes, but utilitarianism considers everyone's welfare while egoism prioritizes the individual. If an FRQ presents a scenario where personal gain conflicts with collective benefit, use this distinction.
Duty-Based Theories
These approaches hold that certain actions are inherently right or wrong, regardless of their consequences. Morality comes from following rules, respecting rights, or fulfilling obligations.
Deontological Ethics
- Rules over results—an action can be morally right even if it produces bad outcomes, as long as it follows the correct moral principles
- Immanuel Kant is the foundational figure, making this theory nearly synonymous with Kantian ethics in many exam contexts
- Business applications include honoring contracts even when breaking them would be profitable, or refusing to deceive customers regardless of competitive pressure
Kantian Ethics
- Categorical imperative is the core concept: act only according to principles you could will to become universal laws for everyone
- Humanity as an end, never merely a means—Kant's second formulation prohibits treating people purely as tools for your own purposes
- Intention matters more than outcome—a failed attempt to do good is still morally praiseworthy if the intention was right
Rights Theory
- Inherent individual rights must be respected regardless of social benefit; you can't violate someone's rights even to help others
- Natural vs. legal rights distinction is key: natural rights (life, liberty) exist independently of law, while legal rights are granted by governments
- Negative vs. positive rights often appears in business ethics: negative rights require others not to interfere, while positive rights may require action or resources
Compare: Kantian Ethics vs. Rights Theory—both are deontological, but Kantian ethics derives duties from rational principles (the categorical imperative), while rights theory starts from the inherent dignity and entitlements of individuals. Both would oppose using employees merely as means to profit.
Character and Relationship-Based Theories
Rather than asking "What should I do?" these theories ask "What kind of person should I be?" or "How should I relate to others?" The focus shifts from actions to agents and relationships.
Virtue Ethics
- Character over conduct—emphasizes developing traits like honesty, courage, fairness, and prudence rather than following specific rules
- Aristotelian roots trace to ancient Greek philosophy; the goal is eudaimonia (human flourishing) achieved through virtuous living
- Business leadership applications include asking not "Is this action legal?" but "Is this the kind of leader I want to be?"
Care Ethics
- Relationships as morally primary—challenges theories that treat ethics as abstract principles applied to isolated individuals
- Empathy and context matter more than universal rules; the right action depends on understanding the specific people and relationships involved
- Feminist philosophy origins—developed partly as a critique of male-dominated ethical traditions that undervalued caregiving and emotional connection
Compare: Virtue Ethics vs. Care Ethics—both focus on the moral agent rather than rules, but virtue ethics emphasizes individual character development while care ethics emphasizes relational responsibilities. Care ethics is particularly relevant when analyzing workplace culture and employee well-being.
Social and Structural Theories
These frameworks address how individuals relate to society and how institutions should be organized. They're essential for understanding corporate obligations and systemic fairness.
Social Contract Theory
- Morality from mutual agreement—ethical obligations arise because rational individuals would consent to certain rules for mutual benefit
- Hobbes, Locke, and Rousseau represent different versions: Hobbes emphasizes order, Locke emphasizes natural rights, Rousseau emphasizes collective will
- Corporate legitimacy questions often invoke social contract thinking: businesses operate with society's implicit permission and must honor that trust
Justice Theory
- Fairness in distribution—concerned with how benefits and burdens are allocated across society and within organizations
- John Rawls and the "veil of ignorance"—his thought experiment asks what rules you'd choose if you didn't know your position in society
- Procedural vs. distributive justice distinction matters: fair processes vs. fair outcomes are related but separate concerns
Stakeholder Theory
- Beyond shareholders—businesses have moral obligations to employees, customers, suppliers, communities, and the environment
- R. Edward Freeman is the key theorist; his work directly challenges the shareholder primacy model associated with Milton Friedman
- Balancing competing interests is the practical challenge; stakeholder theory doesn't automatically tell you whose interests should win in conflicts
Compare: Social Contract Theory vs. Stakeholder Theory—social contract theory explains why businesses have obligations (implicit agreement with society), while stakeholder theory identifies to whom those obligations extend. Use both together when analyzing corporate responsibility questions.
Applied Business Frameworks
These theories translate ethical principles into specific guidance for corporate behavior and decision-making.
Corporate Social Responsibility (CSR)
- Triple bottom line thinking—businesses should measure success by people, planet, and profit, not profit alone
- Voluntary vs. strategic CSR distinction matters: some companies pursue CSR for ethical reasons, others for reputation and competitive advantage
- Transparency and accountability are operational requirements; CSR without reporting mechanisms risks becoming mere public relations
Compare: Stakeholder Theory vs. CSR—stakeholder theory is the philosophical foundation, while CSR is the practical implementation. Stakeholder theory tells you why you should consider non-shareholders; CSR tells you how through specific programs and reporting.
These aren't theories about what's right—they're theories about the nature of morality itself. Understanding them helps you analyze cross-cultural business ethics.
Ethical Relativism
- No universal moral truths—what's right varies by culture, time period, or individual perspective
- Cultural relativism is the most common business application: different societies have legitimately different ethical standards
- Tolerance vs. paralysis is the tension; relativism promotes respect for difference but can make it hard to criticize any practice
Ethical Absolutism
- Universal moral principles exist—some actions are right or wrong regardless of cultural context or personal belief
- Human rights discourse typically assumes absolutism; we condemn certain practices everywhere, not just where local norms oppose them
- Challenges of application arise when determining which principles are truly universal and who gets to decide
Ethical Pluralism
- Multiple valid frameworks—no single theory captures all moral truth; different situations may call for different approaches
- Practical wisdom required to know which framework applies when; this is closer to how most people actually reason through dilemmas
- Integration over competition—pluralism suggests ethical theories complement rather than contradict each other
Compare: Ethical Relativism vs. Ethical Absolutism—these represent opposite positions on whether universal moral truths exist. Most exam scenarios involving multinational corporations or cross-cultural conflicts require you to navigate this tension. Ethical pluralism offers a middle path.
Quick Reference Table
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| Outcome-focused ethics | Utilitarianism, Consequentialism, Ethical Egoism |
| Duty-focused ethics | Deontological Ethics, Kantian Ethics, Rights Theory |
| Character/relationship ethics | Virtue Ethics, Care Ethics |
| Social structure ethics | Social Contract Theory, Justice Theory, Stakeholder Theory |
| Applied corporate ethics | Corporate Social Responsibility (CSR) |
| Meta-ethical positions | Ethical Relativism, Ethical Absolutism, Ethical Pluralism |
| Individual rights emphasis | Rights Theory, Kantian Ethics, Justice Theory |
| Collective welfare emphasis | Utilitarianism, Stakeholder Theory, Social Contract Theory |
Self-Check Questions
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Which two theories both focus on outcomes but differ in whose outcomes matter? Explain how each would analyze a decision to close a profitable factory that pollutes a local community.
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A company discovers a supplier uses child labor in a country where the practice is culturally accepted. How would an ethical absolutist respond versus an ethical relativist? Which other theory might help resolve this tension?
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Compare Kantian ethics and utilitarianism: If lying to a customer would prevent significant harm to many people, what would each theory recommend, and why?
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Stakeholder theory and shareholder primacy represent competing views of corporate obligation. Identify which ethical theories support stakeholder theory and explain the philosophical connection.
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You're advising a CEO who wants to be "a good person" rather than just "follow the rules." Which ethical framework best matches this goal, and how does it differ from deontological approaches?