Module II: Introduction to

Business Ethics Concepts

Module II: Introduction to Business Ethics
Concepts

• Teleology, Deontology, and Utilitarianism as Approaches to Ethics

— Ethical Dilemmas in Business — Ethical Universalism and
Relativism in Business —Immanuel Kant’s Categorical Imperative
— Distributive Justice — False Consensus Effect — Implicit Bias -
Virtue Theory — Hedonism — Gary S. Becker’s formula on penalty
for violations — Hong Kong Model of Business Ethics — Meta-
ethics.
Philosophy of Ethics
 Metaethics
• Metaethics is the branch of ethics that examines the
nature, origin, and meaning of ethical concepts, rather
than asking what specific actions are right or wrong.

• What does "good" or "right" actually mean?

(Is "good" an objective fact or just a subjective opinion?)
• Are moral values universal or relative?
(Do moral truths exist independently of human opinion?)
• Where do moral values come from?
(Are they derived from reason, emotions, society, or divine
commands?)
 Normative Ethics
•Normative Ethics is the branch of ethics that seeks to establish
moral standards or principles that guide how people ought to
behave.

•It answers the question:

What is the right thing to do?

• Normative ethics provides rules, principles, or frameworks

to determine what actions are morally right, wrong, good, or
bad.
• Normative Ethics – Major Theories
1. Teleological
2. Utilitarianism
3. Deontology
4. Virtue ethics
 Applied Ethics
•Applied Ethics is the branch of ethics that involves applying moral
principles and theories to real-world, practical situations and specific
problems.

•It answers the question:

What should I do in this specific situation?

•Applied ethics takes the general moral principles from Normative

Ethics and uses them to solve concrete ethical dilemmas in areas such as
medicine, business, environment, technology, and law.
What is ethical theory?
• An ethical theory is a systematic way of approaching ethical
questions from a particular philosophical perspective.
• Ethical Theories are attempts to provide a clear, unified account of
what our ethical obligations are.
• Ethical theories are commonly used- utilitarianism, deontology
virtue ethics etc.
• Each may lead to a different conclusion when applied to the same
ethical dilemma
Approaches to Ethics
• Teleology
• Deontology
• Utilitarianism
Teleological Approach
Teleological ethics
• The word “telos” comes from ancient Greek, and it means “end,” “goal,”
“purpose,” or “final aim.”
• Teleological, it literally means “based on the end or purpose.”
• Telos = purpose or ultimate goal.
• Something is teleological if it is explained in terms of what it is meant to
achieve rather than how it happens.
• The telos of a knife is to cut — that’s its purpose.
• The telos of education might be to develop knowledge and character.
• In teleological ethics, actions are judged by their purpose or end result
(telos) — the good or happiness they produce.
• Telos = the final goal or purpose toward which something naturally
aims.
 • If the outcomes of an action are considered
to be positive/give rise to benefits ------ >
morally right.
• if the outcome causes harm, then the action -
-→ morally wrong.
• The judgement of right or wrong depends on
the consequences of the decision or action.
• From the teleological point of view, human
actions are neither right nor wrong in and of
themselves.
• What matters is what happens as a
Also known as
consequence of those actions.
consequentialist ethics
• Consequences that make actions, good or
bad, right or wrong
 Teleological ethics in Business
• Some things should not be for sale surrogacy services,
and human organs. But it is supported--object to
markets in these items for consequentialist
reasons.
• Arguments- that markets in commodities like kidneys
will lead to the exploitation of vulnerable people,
claim that markets in surrogacy services express the
attitude that women are mere vessels for the
incubation of children; markets in kidneys suggest
that human life can be bought and sold.
Aristotle – The Father of Teleology
• Aristotle believed that everything in nature has a
purpose (telos) — a final end toward which it
naturally strives.
• For humans, he said the telos is “eudaimonia” —
often translated as happiness, flourishing, or living
well.
• Therefore, ethical actions are those that help a
person achieve this telos, fulfilling their purpose as
rational and moral beings.
• His work Nicomachean Ethics explains this idea in
detail.
2. Utilitarianism
 2. Utilitarianism
• The morally right action is the one that produces the greatest
happiness for the greatest number.
• Consequences for everyone affected, not just yourself.
• Jeremy Bentham, John Stuart Mill.
• “The end justifies the means” if it maximizes overall well-being.
• Example: A government taxing the rich to fund education and
healthcare for millions — even if the rich feel unhappy, the overall
happiness of society increases.
Example
The scenario-The 'ticking
bomb' problem

• A terrorist group states that it has concealed a nuclear bomb in

London. The authorities have captured the leader of the group. He
says that he knows where the bomb is. He refuses to reveal the
location
• Torture is guaranteed to produce the information needed to ensure
the authorities find and make the bomb safe
• Is it ethically acceptable for you to have him (or his family) tortured
to find out where the bomb is and thus save thousands of lives, or is
it unethical to torture him, no matter how many die as a result?
2. Hedonism
• Hedonism is the view that pleasure or happiness is the highest good
and proper aim of human life. In other words, actions are judged
right or wrong based on how much pleasure (or avoidance of pain)
they bring.
Examples of Hedonism
• Everyday choice:-Choosing to eat your favorite dessert after a long
day because it gives you pleasure.
• Career decision: Someone takes a job with less pay but more free
time, travel, and relaxation because they value enjoyment over
money.
• Ethical dilemma-If a hedonist sees that telling a white lie will
prevent someone from suffering emotionally, they may choose to
lie—because avoiding pain and increasing happiness is the highest
priority.
3. Egoism
• The ethical egoism is a teleological theory that posits, an action is
good if it produces or is likely to produce results that maximize the
person’s self-interest as defined by him, even at the expense of
others.
• Egoism defines right or acceptable behavior in terms of its
consequences for the individual.
• Depending on the egoist, self-interest may be construed as physical
well-being, power, pleasure, fame, a satisfying career, a good family
life, wealth, or something else.
• In an ethical decision-making situation, an egoist will probably choose
the alternative that contributes most to his or her self-interest.
Example..
• those government officials receives bribe
instead of charging the motorist for over
speeding or drinking and driving just for
their own benefits. They use the same
money to buy the lunch or gifts for their
family members.
Comparison of Hedonism vs Egoism
Aspect Hedonism Egoism
Focus Pleasure and happiness Self-interest
Maximize pleasure, minimize Maximize personal
Moral Guide
pain benefit

Yes – but egoism isn’t

Yes – since pleasure often always about pleasure
Can Overlap?
serves self-interest (could be wealth, power,
success)
• Enlightened egoism.
• Enlightened egoists take a long-range perspective and allow for the
well-being of others although their own self-interest remains
paramount.
• Enlightened egoists may- for example, accept by professional codes
of ethics, control pollution, avoid cheating on taxes, help create jobs,
and support community projects.-- Yet they do so not because these
actions benefit others but because they help achieve some ultimate
goal for the egoist, such as advancement within the firm.
Utilitarianism in business
• Utilitarianism is concerned with the consequences of the decision.
• The quality of a marketing decision or action is assessed by looking
at the consequences of implementing that decision.
• In deciding whether it is unethical the decision-maker will need to:
• assess the likely costs and benefits for each stakeholder
• make a decision based on what action produces the greatest benefit
for all concerned.
• This approach to ethical decision making is often used in public
policy decisions where policy makers have to take the course of
action that is likely to produce the greatest overall benefit for the
greatest number of stakeholders (for example, all inhabitants of a
region).
Hypothetical case of Sam Colt
• Sam Colt is a sales representative for Midwest Hardware, a company that
manufactures nuts and bolts. He is preparing a sales pitch to a construction
company that is building a bridge across the Mississippi River. The bolts
produced by Midwest have a 3 percent defect rate. While this rate is
acceptable in the industry, it makes the bolts unsuitable for projects that may
face sudden and severe stress.
• The new bridge will be located near the New Madrid Fault line, an area with
a 50 percent chance of experiencing a major earthquake in the near future.
Despite this risk, earthquake safety codes do not apply to the bridge’s
construction.
• For Sam, the situation is complicated. If he succeeds in selling the bolts, he
will earn a commission of $25,000 in addition to his salary. However, if he
informs the contractor about the defect rate, the company may lose the deal
to a competitor offering stronger products. On the other hand, if Sam decides
to hide the truth, the bolts could fail in the event of an earthquake, leading to
the collapse of the bridge and the possible deaths of those using it.
• The ethical dilemma Sam faces is whether he should be honest about the
defect rate and risk losing the sale, or conceal the danger and put human
lives at risk.
Egoist Context
• Sam must decide whether to warn the contractor about the 3% defect
rate in the bolts.
• An egoist chooses the option that best serves self-interest.
• If Sam defines self-interest as personal wealth, he may value the
$25,000 commission more than the risk of a bridge collapse.
• He might keep quiet about the defect, hoping to win the sale.
• He could rationalize by saying:
• The chance of an earthquake is low.
• Even if an earthquake happens, bolts might not cause the collapse.
• Nobody could prove that the defective bolts were responsible.
• As an egoist, Sam is likely to stay silent and prioritize his own gain.
 Utilitarian Context
• A utilitarian looks at the option that creates the greatest good for the greatest number.
• Before deciding, Sam would do a cost–benefit analysis.
• Benefits of selling the bolts:
• The bridge will improve transportation and help people reach jobs in St. Louis.
• It will create hundreds of jobs and strengthen the local economy.
• Communities on both sides of the river will be better connected.
• Midwest Hardware will grow and invest in better products.
• Costs/Risks of selling the bolts:
• A bridge collapse could kill or injure about 100 people.
• But the risk seems smaller because:
• Only 3% of bolts are defective.
• There is only a 50% chance of a major earthquake.
• The bridge might not be crowded at the time of a disaster.
• After weighing pros and cons, a utilitarian might decide that selling the bolts creates more
overall benefit than harm.
• As a utilitarian, Sam would probably not alert the contractor to the defect rate.
• Utilitarianism is the idea that business conduct should take into
account the consequence that would benefit the largest amount of
people.
• Egoism is the hedonistic doctrine that holds that the “Good Life”
consists in the experience of personal pleasure.
• Altruism is the hedonistic doctrine that states that the “Good Life”
consists in cultivating the experience of pleasure in others.
 Jeremy Bentham
• Jeremy Bentham (15 February 1748- 6 June 1832) was an
English philosopher and social reformer regarded as the founder of
modern utilitarianism.
• Bentham defined as the "fundamental axiom" of his philosophy the
principle that "it is the greatest happiness of the greatest number that is
the measure of right and wrong.
• He became a leading theorist in Anglo-American philosophy of law, and
a political radical whose ideas influenced the development of welfarism.
• He advocated individual and economic freedoms, the separation of
church and state, freedom of expression, equal rights for women, the
right to divorce.
• He has also become known as an early advocate of animal rights
Bentham's Quantitative Utilitarianism
Measurable Happiness Felicific Calculus Universal Goal
Happiness calculated as the amount of Systematic method to calculate net Maximize total pleasure across all
pleasure minus pain produced by any pleasure and determine the most individuals affected by the decision
given action ethical choice

[Link]
The Felicific Calculus: Bentham's Utility Measurement
Bentham developed seven key factors to systematically evaluate pleasure and pain in moral decision-making:

Intensity Duration Certainty

How strong is the pleasure or pain experienced? How long will the pleasure or pain last? How likely is it to actually occur?

Proximity Productiveness Purity

How soon will the pleasure or pain occur? Probability it leads to additional pleasures Probability it is not followed by pain

Extent
How many people are affected by the action?

The final calculation: Sum all pleasures, subtract all pains to determine the net utility score

[Link]
Visualizing Felicific Calculus

Intensity
Strength of pleasure or pain
Duration
How long effects last

Net Utility
Balancing pleasure and pain

Certainty
Likelihood of outcome
Extent
Number of people affected

Calculating Happiness: The Science of Moral Choice

[Link]
Mill's Qualitative Utilitarianism: Beyond Quantity
John Stuart Mill revolutionized utilitarian thought by arguing
that not all pleasures are created equal. He distinguished
between higher and lower pleasures, emphasizing quality over
mere quantity.
Higher Pleasures

Intellectual, moral, and aesthetic experiences like education, art, and

meaningful relationships

Lower Pleasures

Bodily and immediate sensory experiences like food, physical comfort, and
comfort, and basic enjoyment

"It is better to be a human dissatisfied than a pig satisfied."

[Link]
Comparing Bentham and Mill:
Quantitative vs Qualitative

Bentham's Approach
Quantitative: Happiness equals the measurable sum of all
sum of all pleasures minus pains. Every pleasure has equal
has equal weight in calculations.

Mill's Innovation
Qualitative: Some pleasures possess intrinsic superiority.
Education, art, and friendship provide higher-quality
happiness than basic physical pleasures.

Mill's approach directly addresses criticisms that Bentham's

Bentham's model reduced human happiness to base,
animalistic pleasure-seeking.
[Link]
Types of Utilitarianism in Practice
Act Utilitarianism Rule Utilitarianism
• Bentham's approach: Evaluate each individual • Mill's framework: Follow established rules and
action by examining its specific consequences and principles that generally maximize happiness and
calculating utility for that particular situation. well-being over the long term.
• Every single action should be judged by its • Instead of judging each act separately, we should
immediate result – does it produce more follow general rules that, if everyone followed
happiness than unhappiness right now? them, would maximize happiness in the long run.
• You don’t follow a fixed rule; instead, you • You ask: "What rule, if generally practiced, creates
calculate each time:"Will this action maximize the greatest happiness?“
happiness in this situation?“ Example: Same cheating case:
Example: Imagine a student caught cheating in an • The rule is “Cheating should always be punished”.
exam. • Why? Because if the rule is not followed, many
• If punishing the student will reduce overall students may start cheating, leading to unfairness
happiness (maybe it will ruin their life, upset and unhappiness overall.
their family, and scare others), the teacher may • So, even if forgiving one student looks good in the
decide to let them go this time. short run, sticking to the rule leads to greater
• Because, in this case, the act of forgiving may happiness in society.
bring more happiness than strict punishment.
[Link]
Challenges in Measuring Utility

Subjectivity Problem Interpersonal Comparisons Individual vs. Majority Rights

Assigning numerical values to complex Comparing one person's happiness to
Rights
human experiences like pleasure and happiness to another's proves Balancing individual rights against
pain involves inevitable subjective extraordinarily complex. How do we majority happiness remains
judgments that vary between we weigh different people's well-being controversial. Can the majority's
individuals. being fairly? pleasure justify harm to individuals?
individuals?

[Link]
[Link]
Deontological Approach
Deontology
• Its name comes from the Greek word ’deon’, meaning duty.
• Actions that obey these rules are ethical, while actions that do not,
are not
• There are many philosophers who reject the entire teleological
agenda by arguing that moral goodness has nothing to do with the
pleasure, happiness, and or consequences.
• Deontological theories are by definition duty-based.
• morality, according to deontology, consists in the fulfillment of
moral obligations, or duties.
• Deontology refers to moral philosophies that focus on
the rights of individuals and on the intentions associated
with a particular behavior rather than on its
consequences.
• Fundamental to deontological theory is the idea that
equal respect must be given to all persons.
• The utilitarian, however, might consider as acceptable an
action that resulted in a person’s death if that action
created some greater benefit.
• Deontological philosophies regard certain behaviors as
inherently right, and the determination of this rightness
focuses on the individual actor, not society.
• Thus, these perspectives are sometimes referred to as
nonconsequentialism an ethics based on respect for
persons.
CASE
• For example, suppose you’re a
software engineer and learn that a
nuclear missile is about to launch that
might start a war.
• You can hack the network and cancel
the launch, but it’s against your
professional code of ethics to break
into any software system without
permission.
• And, it’s a form of lying and
cheating. However, in letting the
missile launch, thousands of people
will die
 Case -Slavery

• In early nineteenth-century America, many members of the anti-slavery

movement argued that slavery was wrong, even though slaveholders and
southern society in general, economically benefited from it.
• Suppose, also that the slaveholders were also able to condition the slaves
to the point where they act acually enjoyed living under slavery.
• From a teleological perspective, slavery would appear to be an ideal
economic institution. Everybody is happy!
• A deontologist would argue that even if the American government
conducted a detailed cost/benefit analysis and decided that slavery
created more pleasure in society than pain, it would still be wrong.
Argument of deontologist-
• Using human beings solely for the purpose of increasing the
pleasure of others is simply wrong, even when they seem to consent
to such an arrangement.
• Right and wrong have nothing to do with pleasure, pain, or
consequences. Morality is based on whether acts conflict with moral
rules or not, and the motivation behind those acts.
• An act is therefore, good if and only if it was performed out of a
desire to do one's duty and obey a rule. In other words, act out of a
good will.
• Hence, slavery is wrong, not because of it's negative consequences,
but because it violates an absolute moral rule, "Never treat a person
as a means and always treat a person as an end."
Approaches to the establishment of
deontological principles
• The problem here is- "How does one generate absolute moral rules
apart from the distribution of pleasure and pain?" In the Western
tradition there have been two approaches to the establishment of
deontological principles
1. Divine command theory
2. Natural law theory.
• Divine command theory is a meta-ethical theory which
proposes that an action's status as morally good is equivalent to
whether it is commanded by God. The theory asserts that what is
moral is determined by God's commands and that for a person to
be moral he is to follow God's commands

• Natural law theory a system of law based on a close observation

of human nature, and based on values intrinsic to human nature
that can be deduced and applied independent of positive law (the
enacted laws of a state or society). According to natural law
theory, all people have inherent rights, conferred not by act of
legislation but by "God, nature, or reason.”
 Case- TheTrolley problem
• Trolley problem is the name given to a thought experiment in
philosophy and psychology.
• It has sprouted a number of variations, but is distilled to something
like this: you are riding in a trolley without functioning brakes,
headed toward a switch in the tracks. On the current track stand
five people who stand to be killed if the trolley continues on its
path. You have access to a switch that would make the trolley
change to the other track, but another individual stands there. That
person is certain to be killed if the switch is activated.
• So do you switch tracks or not?
Utilitarianism vs. Deontologicalism
• The school of thought that killing the one person to save the five is
usually aligned with utilitarianism (the belief that the best actions
are those that result in the greatest good for the greatest number
of people).
• Another school, that of deontological ethics, argues that an action
is inherently right or wrong regardless of the consequences. This
school would favor against taking the action that results in the
killing of the individual on the other track.
• [Link]
Universalism
 Ethical Universalism
• Some moral principles are universal — valid for all people, in all cultures,
at all times.
• Basis: Morality is objective, not dependent on culture, religion, or personal
opinion.
• Thinkers: Immanuel Kant (duty ethics), natural law theorists, human
rights advocates.
• Implication: Provides a common standard of ethics (e.g., Universal
Declaration of Human Rights).
• Other names: Absolutism, Objectivism
• Examples: Murder, cannibalism, lying, stealing, and prostitution are
considered wrong everywhere.
• Belief: There should be one single moral code for all societies.
Arguments For Universalism
• Universalisability: If something is right for me, it is right for you
too. Same standard for everyone.
• Rational: Moral judgments can be defended logically as true or
false.
• Accepted in all cultures: Some values (like banning murder) exist
everywhere.
• Supported by religion: Holy books don’t make separate rules for
men/women, rich/poor.
• Ultimate moral standard: Universalism is seen as the highest
level of morality.
 Arguments Against Universalism
• Exceptions exist: Example – killing is wrong, but killing a criminal may
be justified. Tibetans kill goats for survival. Tibet is a cold, mountainous
region with very limited farming options. For centuries, people have
depended on meat for survival. From this perspective, killing goats is
acceptable, because it is necessary for survival and culturally normal.
• Blocks diversity: If everyone followed the same moral code, there would
be no cultural uniqueness or innovation.
• Whose authority? Different religions, states, and laws give different
rules. So which one is “universal”?
• Can lead to intolerance: Forcing one universal standard has caused
issues (e.g., forced religious conversions, political systems, one-party
rule).
Ethical Relativism
Ethical Relativism
• Morality is relative to culture, society, or individual perspective.
• Basis: What is considered right or wrong depends on the values and
beliefs of a community. Morality is not universal. What is right in one
culture may be wrong in another.
• Example: Eating beef:
• In India → often seen as wrong.
• In the US → generally acceptable.
• Thinkers: Ruth Benedict, anthropologists who study cultural diversity.
• Implication: Tolerates cultural differences, but may excuse harmful
practices (e.g., child marriage, slavery in history).
• Other names: Pluralism, Particularism, Subjectivism.
• Examples: Food habits, marriage customs, dress codes, punishments for
crimes.
 Arguments For Relativism
• Cultural Differences: Every society has its own values → so ethics is culture-specific.
• Encourages Tolerance: Relativism promotes acceptance of diversity (like India’s
pluralism, secularism, multi-party democracy).
• Not about “right vs. wrong”: Just different perspectives.
• Supports Civil Liberty: Everyone is free to live as they like, as long as they don’t harm
others.
• Customization = Satisfaction: Like cash-based welfare (giving money instead of free
food) → people can choose what they want.
• Approves Diversity: Diversity is natural (different climates, crops, societies).
Relativism accepts this reality.
• Nature Supports Relativism: The world itself is diverse (deserts vs. forests, heat vs.
cold). So diversity is natural and necessary.
• Society Evolves: Societies evolve and values change over time.
Arguments Against Relativism
• Causes Imbalance: Different moral codes can lead to inequality, conflict, or even civil
war.
• Moral Ignorance: Relativism can be an excuse for not knowing or following ethics.
Truth is independent of beliefs.
• No Single Truth: If everyone defines their own morality, how can there be a clear
standard of right and wrong?
• Failure to Reason: People may behave inconsistently due to lack of attention or
discipline (like students making different assignments when given the same task).
• Dangerous Justifications: If relativism is true, then practices like slavery in the US
could be “okay” just because they were accepted locally. That’s morally unacceptable.
• Temporary Stage: Relativism is not the final answer — it is only a transition between
“no morality” (amoralism) and “absolute morality” (universalism).
• Unreliable: If relativism were right, we couldn’t say that Mother Teresa was better
than Hitler, which feels absurd.
• Blocks Progress: If societies stay stuck in relativism, they may not progress or
improve ethically.
•Universalism = "One truth everywhere."
•Relativism = "Different truths in different places."
Business / Marketing Examples
• 1. Bribery
• Universalism: Bribery is always unethical because it promotes
unfairness and corruption.
• Relativism: In some cultures, “facilitation payments” (small gifts, tips)
may be seen as acceptable or even expected.
2. Advertising
• Universalism: False or misleading advertising is wrong everywhere,
since it exploits consumers.
• Relativism: In some cultures, exaggerated claims (“world’s best tea!”)
are tolerated as sales talk, but in others it’s considered unethical or
illegal.
3. Labor Practices
• Universalism: Child labor is universally unethical, violating basic
human rights.
• Relativism: In some developing countries, children working with
families in farms or shops may be seen as normal or even necessary
for survival.
 Immanuel Kant’s
Categorical Imperative
Meanings
Categorical
• From the word “category” → it means absolute, unconditional, without
exception.
• Something that holds true in all situations, no matter what.
• “He gave a categorical answer” → means a clear, definite, unconditional
answer.
Imperative
• From the word “command” or “must-do”.
• In philosophy/ethics, it means a moral obligation or duty.

Categorical Imperative = An unconditional moral duty that everyone

must follow, no matter the situation.
Categorical Imperative
• For Kant, morality is not about consequences (that’s
utilitarianism). It’s about duty and doing what reason commands.
• The only thing that is unconditionally good is a good will — the
will to act from duty for duty’s sake.
• A moral action has moral worth only if it is done from duty, not
merely because it produces a desirable outcome or because it
aligns with one’s inclinations.
• Represent deontological ethics
Hypothetical vs Categorical imperatives
• Hypothetical imperative: “If you want X, do Y.” (e.g., “If you want
to pass, study.”) — dependent on personal goals.
• Categorical imperative (CI): A command you must follow
regardless of your desires: “You ought to do X.” That’s the central
Kantian moral law.

Kant’s famous formulation:

• “Act only according to that maxim by which you can at the same
time will that it should become a universal law.”
(Maxim = the personal principle behind an action)
 Classic examples (worked through Kant’s
way)
A. Lying promise (false promise to borrow money)
• Maxim: “When I want money, I will promise to repay even though I do not intend to.”
• Universalize: If everyone did this, promises would have no credibility
• Kant’s verdict: Lying promise is impermissible.

B. Suicide to avoid suffering

• Maxim: “When life becomes unbearable, I will end my life to escape suffering.”
• Universalize: The natural tendency to preserve life would be undermined; you cannot
consistently will a law that destroys the basis for valuing life itself
• Kant’s verdict: Suicide for self-preservation reasons is impermissible.
 Moral worth and motive
• Acting from duty = doing the right thing because it is right (moral
worth).
• Acting in accordance with duty but from inclination (e.g., fear,
self-interest) = no real moral worth, according to Kant.

• Example: Telling the truth because it avoids punishment is not

morally praiseworthy in Kant’s account; telling the truth because
you respect the moral law is.
Formulations of the Categorical Imperative
1. Formula of Universal Law (FUL)
• “Act only according to that maxim whereby you can at the same time will
that it should become a universal law.”
• Test: Can my personal rule (maxim) be made universal without
contradiction?
Example: Lying can’t be universalized → society would collapse.
2. Formula of the Law of Nature (FLN)
• “Act as if the maxim of your action were to become through your will a
universal law of nature.”
Imagine your action as if it were a law of nature (like gravity) that
everyone must follow automatically.
Example: If lying were a law of nature, communication would be
impossible → contradiction.
[Link] of Humanity (FH)
• “Act so that you treat humanity, whether in your own person or in that
of another, always at the same time as an end and never merely as a
means.”
Respect human dignity. Don’t use people as tools for your own goals.

4. Formula of Autonomy (FA)

• “Act only so that your will can regard itself at the same time as making
universal law through its maxims.”
You are both the law-maker and law-follower of morality. Moral duty
comes from your rational will, not from outside authority.
5. Formula of the Kingdom of Ends (FKE)
• “Act according to maxims of a universally legislating member of a
merely possible kingdom of ends.”
Imagine a community (“kingdom”) where every rational being
treats others as ends in themselves, and laws are made with
universal respect.
Example: A just society where laws protect everyone equally.
Strengths (why Kant is influential)
• Impartiality & universality
• Respect for persons
• Moral clarity
• Emphasis on autonomy
Kant’s Categorical Imperative asks you to act only on principles you
could rationally will as universal laws and to always treat humans as
ends — so morality is rooted in reason, duty, and respect for
persons, not in consequences.
• [Link]
 A Kantian approach to business ethics
•Focus on duty and moral principles, not just profits.
•Treat employees, customers, and partners with respect—never
just as a means to an end.
•Act in ways that could be universal laws—ask yourself, “What if
everyone did this?”
•Honesty is essential—don’t lie, cheat, or deceive, even if it
benefits the business.
•Make decisions that are morally right, not just financially
rewarding.
•Promote fairness and integrity in all business practices.
Hedonism
 Hedonism in Ethics: The Pursuit of Pleasure
as the Highest Good
• Exploring one of philosophy's most
challenging questions--
Can the pursuit of pleasure guide us
toward the good life?
What is Hedonism?
• Hedonism is an ethical theory rooted in the
Greek word hēdonē, meaning pleasure.
• It proposes that pleasure is the most valuable
aspect of human experience and the ultimate
goal of existence
• At its core, hedonism challenges us to
consider whether maximizing pleasure and
minimizing pain should be our guiding moral
principles.
Hedonism
• Greek Origins- From hēdonē, the ancient Greek word for pleasure
and delight
• Moral Framework- Pleasure as the highest good, pain as what we
ought to avoid
• Life's Direction- Maximizing pleasure while minimizing suffering
guides ethical action
 Types of Hedonism
• Hedonism isn't a monolithic
philosophy—it branches into
distinct forms, each offering a
different perspective on
pleasure's role in human life
and ethics.
 Psychological Hedonism (descriptive)
• What people actually do
• It says: “Human beings are naturally
motivated by the desire for pleasure and
the avoidance of pain.”
• It’s a scientific or descriptive claim about
human nature — how people really
behave.
• Example: When you eat chocolate, you do
it because it gives you pleasure — not
because of duty or logic.
• We always act to gain pleasure or avoid
pain (whether we realize it or not).
• It doesn’t say we should do this — only
that we do.
Normative Hedonism(Guiding Principle /
Decision-Making)
• How we should decide or make rules
• It is often seen as part of normative ethics, which gives
guidelines for action or moral rules.
• It says: “Pleasure should be the standard (norm) for
judging whether an action is good or bad.”
• Example: When making laws or policies, choose the ones
that maximize happiness and minimize pain.
• Pleasure is the norm or criterion for moral judgment
and decision-making.
• It overlaps with ethical hedonism but focuses more on
how to apply the principle (in choices, laws, etc.).
Ethical Hedonism (Moral)
• What people ought to do (morally right)
• It says: “We should act in ways that produce the
greatest pleasure and least pain.”
• It’s a moral theory — not just describing behavior
but telling us what is right or wrong.
• Helping others is good if it increases overall
happiness (yours or society’s).
• Pleasure is the highest moral good — the right
action is the one that increases pleasure.
• Philosophers: Epicurus, Jeremy Bentham, John
Stuart Mill.
 Historical Origins and Key Figures
1. Aristippus of Cyrene- 4th century BCE- Founded
early hedonism, emphasizing immediate sensory
pleasure and living fully in the present moment
2. Epicurus- 341–270 BCE- Refined hedonism to focus
on tranquility (ataraxia) and the absence of pain,
advocating for simple pleasures over excess
3. Jeremy Bentham-1748–1832- Introduced
utilitarianism, declaring pleasure and pain as
humanity's "sovereign masters" in moral decision-
making
Aristippus of Cyrene (4th century BCE)
• He was a Greek philosopher and a student of Socrates.
• Pleasure is the highest good and the main goal of life.
• Aristippus taught that:-Immediate bodily pleasures (like food, comfort, and
physical enjoyment) are the best form of happiness.
• Pain should be avoided, because it is evil.
• Happiness = experiencing pleasure in the present moment.
• He believed that:- We should live for the moment — enjoy life now rather than
worrying about the future.
• All pleasures are essentially equal, though some may have different intensities.
• A wise person knows how to control pleasures, not be controlled by them.
Example:
• If eating a delicious meal brings you joy right now, that joy is good in itself.
But you should still have self-control — enjoy it, but don’t become a slave to
pleasure.
 Epicurus of Samos (341–270 BCE)
• Ancient Greek philosopher.
• He also believed that pleasure is the ultimate good, but he gave the
idea a peaceful and thoughtful meaning — not wild enjoyment
• True pleasure is the absence of pain and mental disturbance.
• Epicurus taught that:
• The goal of life is happiness, and happiness comes from freedom
from pain (aponia) and peace of mind (ataraxia).
• He did not encourage luxury or excess pleasure.
• Instead, he said: Choose pleasures wisely — some pleasures lead to
more pain later, so avoid them.
Teachings of Epicurus:
• Pleasure is the highest good, but not every pleasure is worth taking.
• Example: Eating too much gives pleasure now but causes pain later.
• Mental pleasure is higher than physical pleasure.
• Peaceful thoughts, friendship, and lack of fear bring lasting joy.
• Avoid unnecessary desires.
• Desires are of three types:
• Natural and necessary (like food, water, shelter) → should be satisfied.
• Natural but not necessary (like luxury food) → can be avoided.
• Unnatural and unnecessary (like fame, wealth) → should be avoided.
• Freedom from fear is essential — especially fear of death and gods.
• He said, “Death is nothing to us, for when we exist, death is not present; and when death is present, we
no longer exist.”
• Simple living leads to great happiness.
• He believed in living modestly, with good friends and calm surroundings.
Goal of Life (According to Epicurus):
• To achieve ataraxia (peace of mind) and aponia (absence of pain).
• So for him, pleasure = calmness + freedom from physical and mental pain.
 Jeremy Bentham (1748–1832)
• Founder of Utilitarianism, which is based on ethical hedonism — the
idea that pleasure and happiness are the highest moral good.
• He lived many centuries after the Greek philosophers (like Epicurus)
and gave hedonism a social and moral dimension.
• “The right action is the one that produces the greatest happiness for
the greatest number of people.”
• So for Bentham, pleasure = good and pain = evil,
but not just for one person — it’s about everyone affected by an action.
• The moral worth of an action depends on how much pleasure or pain it
creates.
• This idea is called the Principle of Utility (good actions are those that
increase the net balance of pleasure over pain.)
 Criticisms and Challenges
• Promotes Selfishness?-
Critics argue hedonism encourages short-term gratification and
self-centered behavior at others' expense
• The Hedonistic Paradox-
Directly pursuing pleasure often leads to disappointment—
happiness may come as a byproduct, not a goal
• Incomplete Value System-
Does pleasure alone capture everything that matters? What about
justice, meaning, dignity, and virtue?
Hedonism vs. Other Ethical Theories
• Hedonism exists within a broader landscape of competing
philosophical perspectives on the good life and moral action.
• Stoicism- Prioritizes virtue over pleasure, teaching acceptance of
pain as inevitable and focusing on what we can control
• Eudaimonism- Emphasizes human flourishing through virtue and
excellence, not mere pleasure—a life of meaning and character
• Positive Psychology- Contemporary approach integrating pleasure
with purpose, engagement, relationships, and accomplishment
Hedonism Today: Beyond Stereotypes
• Intellectual Pleasures- Reading, learning, creative pursuits, and
philosophical contemplation
• Aesthetic Experiences- Beauty in art, music, nature, and cultural
appreciation
• Sustainable Happiness- Long-term wellbeing that respects others
and the environment
• Social Connection- Friendship, love, community, and meaningful
relationships
• Modern hedonism influences contemporary ethics, wellbeing
research, public policy, and questions about how we can live both
pleasurably and responsibly. It challenges us to think seriously
about what makes life worth living.
Conclusion: The Complex Legacy of
Hedonism
• Hedonism's enduring contribution to philosophy lies in forcing us to
confront fundamental questions:
--What role should pleasure play in a good life? Can we build ethical
systems on the foundation of human happiness?
• While few modern philosophers embrace hedonism in its pure form, its
influence persists. The challenge of balancing pleasure with
responsibility, meaning, and virtue remains central to both personal
ethics and social philosophy.
• Perhaps hedonism's greatest gift is not providing answers, but asking
the right questions about what we value and why.
• "Nature has placed mankind under the governance of two sovereign
masters, pain and pleasure.“- — Jeremy Bentham
Distributive Justice
 Distributive Justice
• Distributive justice is the principle that resources, opportunities
and benefits in a society should be allocated in a fair and
equitable manner.
• It concerns how wealth, income, health care, education, and other
social goods are distributed among individuals and groups.
• Different theories of distributive justice propose various ways to
determine fairness, such as distributing resources based on need,
effort, or contribution.
• The goal is to create a system that ensures fairness while
maintaining social stability and economic efficiency.
Key Thinker: John Rawls
• In his famous book A Theory of Justice (1971), Rawls
developed the most influential modern theory.
• He asked us to imagine designing society from the
“original position” behind a “veil of ignorance”
(you don’t know if you’ll be rich or poor, healthy or
disabled, male or female, etc.).
• From this neutral position, people would choose
rules that are fair to everyone.
1. The Original Position
• Rawls says: Imagine a group of people are coming together to design the rules of society
(like writing the Constitution).
• They must decide on rights, laws, and how wealth will be distributed.

2. The Veil of Ignorance

• To make sure no one cheats or favors themselves, Rawls says:
• Imagine you don’t know who you will be in that society.
• You don’t know if you’ll be:
• Rich or poor
• Male or female
• Belonging to a majority or minority religion
• Healthy or disabled
• Upper caste or lower caste
• This ignorance forces you to design fair rules, because you might end up in any position
once the veil is lifted.
The veil of ignorance
refers to a scenario where
people are asked to design
an imaginary society they
will have to live in,
without knowing whether
they are going to be rich
or poor. This means that
they have to decide what
is fair before they know
how much they will
personally stand to gain
or lose from any given
arrangement
Example
• Suppose you’re designing tax policy behind the veil of ignorance.
• You don’t know if you’ll be a billionaire or a street vendor.
• Would you want no taxes ?
• Would you want high progressive taxes with free education and
healthcare for all?
• So, behind the veil of ignorance, rational people would design a
fair and just society.
• The veil of ignorance is a thought experiment that makes us think
fairly by removing our personal bias.
John Rawls’ two key principles of justice
1. Principle of Equal Liberty
• Every individual should have the same set of basic rights and
freedoms. These rights cannot be traded away for economic or
social benefits.
• Example- reedom of speech, right to vote, freedom of religion,
right to personal property, right to a fair trial.
• These rights are universal and equal — one person’s liberty
cannot be reduced to increase another’s.
2. Difference Principle
• Rawls accepts that inequalities (like differences in income, wealth, or status) will exist.
But he places two strict conditions on them:
a) Fair Equality of Opportunity
• Positions of advantage (e.g., CEO, Prime Minister, judge, doctor) must be open to all and
not restricted by birth, class, caste, or wealth.
• It means society should actively ensure equal access — for example, good education,
scholarships, training — so that even a poor child has a fair shot at becoming a doctor
or judge.
b) Benefit to the Least Advantaged
• Inequalities are acceptable only if they improve the situation of the poorest or weakest
members of society.
• But if inequality only benefits the rich and does not uplift the poor, then it is unjust.
 Example
• where resources are allocated based on need.
1. Public health care programs provide medical services to individuals
who might not afford them otherwise, ensuring that everyone has
access to basic health care.
2. Progressive taxation- where individuals with higher incomes
contribute a larger percentage of their earnings to fund public services
like education and infrastructure.
3. Merit-based distribution such as scholarships awarded to students
who excel academically, ensuring that opportunities are given to those
who demonstrate effort and achievement.
• These examples show different ways societies attempt to distribute
resources fairly.
Strengths of distributive justice
• It promotes fairness by ensuring that individuals have access to
essential resources.
• Societies can reduce extreme inequalities and provide a more stable
and just environment for everyone.
• Improved social cohesion as people are more likely to feel valued and
included when they believe they are being treated fairly.
• It encourages economic and social mobility.
• When opportunities like education and health care are made available
to all, individuals from disadvantaged backgrounds have a better
chance to succeed.
• More productive and innovative society as people are able to reach their
full potential regardless of their starting point.
Criticisms of distributive justice
• Determining fairness can be challenging.
• Different people and societies have different ideas about what constitutes
a fair distribution of resources.
• Some believe that wealth should be allocated based on effort and hard
work, while others argue that need should be the main factor.
• Discourage individual motivation and productivity. If resources are
allocated primarily based on need rather than effort, some individuals
may feel less motivated to work hard or contribute to society.
• This can create a situation where people rely too heavily on support
systems instead of striving for personal achievement.
• Balancing fairness with incentives for productivity is an ongoing
challenge in discussions about distributive justice.
Alternative to distributive justice/contrast
• Procedural justice: Instead of emphasizing equal distribution,
procedural justice ensures that rules and systems are transparent,
consistent, and applied equally to everyone.
• Which focuses on the fairness of the processes used to make
decisions rather than the outcomes themselves.
• Egalitarian view: Everyone gets exactly the same
• Libertarian view : People keep what they earn; redistribution is
wrong
Distributive Justice in Business Ethics
Fair Compensation & Opportunities
Ensures equitable pay structures, promotion pathways,
and professional development opportunities within
organizations, moving beyond basic legal compliance.

Addressing Historical Disparities

Recognizes and actively works to correct systemic
disadvantages faced by women, racial minorities, disabled
disabled employees, and other marginalized groups.
groups.

Equitable Access & Support

Goes beyond equal treatment to provide tailored
resources and support systems that enable all employees
employees to succeed and contribute meaningfully.
meaningfully. [Link]
Real-World Example: Pay Equity in Organizations

The Challenge
Research consistently shows that many companies
historically underpay marginalized groups for performing
equal work. These disparities often stem from unconscious
bias, historical discrimination, and systemic barriers.

The Solution
• Regular pay equity audits and salary adjustments
• Transparent promotion criteria and processes
• Structured mentorship and sponsorship programs
• Bias training for managers and hiring teams

[Link]
 Why Distributive Justice Matters in Business
Fair resource When employees
distribution creates perceive fairness,
psychological safety Increases Motivation they demonstrate
and strengthens Builds Trust higher engagement
employee-employer and productivity
relationships levels
Equitable
treatment reduces
Fosters Loyalty turnover and
Ensures Sustainability creates advocates
for organizational
Ethical resource values
distribution supports
long-term business Addresses systemic
success and societal inequalities and
well-being Promotes Inclusion creates workplaces
where everyone can
thrive [Link]
False Consensus Effect
False Consensus Effect
• A cognitive bias where people overestimate how much others share
their beliefs, behaviors, or choices.
• The false consensus effect is a thinking error where people believe that
their opinions, behaviors, or choices are more common than they really
are.
• They assume that most other people think the same way they do, even
when there's no real evidence to support that belief. This can happen in
everyday situations like conversations or group decisions.
• The false consensus effect makes it harder to understand other people's
perspectives because it leads us to believe that our view is the normal
one.
Examples
• A student skips studying and assumes most classmates also skip.
• Someone thinks everyone agrees with their opinion on a school
rule or favorite show because their close friends do.
• A person on social media believes their post reflects what everyone
thinks, just because it gets many likes from similar-minded people.
 Causes
• Selective groups – Spending time mostly
with like-minded people.
• Need to feel normal/right – Believing
others agree boosts confidence.
• Limited information – Filling gaps with
assumptions about others’ views.
• Cognitive shortcuts-Humans naturally
project their attitudes onto others to reduce
uncertainty and make quick social judgments
• Echo chamber-Social environments
reinforce similar viewpoints, strengthening
the belief that our opinions are universal
 Effects
• Misunderstanding others – Ignoring or undervaluing different
viewpoints.
• Conflict – Expecting agreement but receiving disagreement leads to
frustration or defensiveness.
• Closed-mindedness – Believing we already know what most
people think prevents learning new ideas.
Solutions
• Ask questions & listen actively – Gain real understanding of
others’ perspectives.
• Diversify interactions – Spend time with people who don’t
always agree.
• Stay humble & mindful – Remember our experience is only a
small piece of the bigger picture.
False Consensus Effect in Business: The Hidden Risk
Strategic Blindness
Decision-makers assume their preferences reflect
the majority, leading to misaligned business
strategies and product development

Marketing Disconnect
Marketers believe customers think like them,
creating campaigns that resonate internally but fail
in the marketplace
Internal Friction
HR leaders overestimate agreement on policies
and culture, causing unexpected resistance and
employee dissatisfaction
[Link]
Case Study: Marketing Missteps from False
Consensus
• When marketers design campaigns based on personal preferences rather
than customer data, the results are predictably disappointing. This leads to
poor product-market fit, wasted advertising budgets, and missed growth
opportunities.

"We thought everyone cared about

sustainability as much as we did, but our
target demographic prioritized
convenience and price over
environmental impact."

The lesson: Personal values don't always translate to market demands.

[Link]
 How to Detect False Consensus in Your Business

Data Reality Check Diverse Perspectives Anonymous Feedback

Compare your Use diverse teams Conduct anonymous

assumptions with from different surveys and feedback
objective data, backgrounds, sessions to reveal true
customer feedback, departments, and opinions without
and market research. experience levels to social pressure or
Let numbers challenge challenge shared hierarchy influence.
your intuitions. biases and
assumptions.
[Link]
Avoid the False Consensus Trap

Recognize Your Biases

Prioritize Evidence

Embrace Different Views

[Link]
Blockbuster& the False
Consensus Effect
The Beginning (Late 1990s)
• Blockbuster was the king of video rentals, with over 9,000 stores
worldwide. People went to stores, rented VHS tapes (later DVDs),
and returned them within a few days.
• The problem? Late fees. Blockbuster made $800 million a year
from customers paying late return charges.
• In 1997, Reed Hastings and Marc founded Netflix.
• Their idea: rent DVDs by mail with no late fees.
• Customers subscribed online, chose movies, and got DVDs
delivered at home.
Netflix’s Struggle
• In the early 2000s, Netflix was still small, not profitable, and competing with giant
Blockbuster.
• In 2000, Hastings even offered to sell Netflix to Blockbuster for $50 million.
• Blockbuster laughed at the offer — they thought Netflix was a “niche business” and
customers only wanted big hits and physical store rentals.
• Here’s the false consensus bias: Blockbuster assumed everyone loved their model
because they believed in it.
Netflix Innovates
• Netflix used data analytics to track what people actually watched.
• They discovered customers wanted:
• Variety (not only blockbusters, but also niche titles, old shows, documentaries).
• Convenience (no late fees, watch at home).
• In 2007, Netflix shifted to online streaming — movies and shows on-demand over the
internet.
• Blockbuster’s Decline
• Blockbuster was too late to react.
• They launched their own streaming platform only after Netflix was already
popular.
• Their business depended heavily on late fees, so they hesitated to remove
them.
• By 2010, Blockbuster went bankrupt.
Netflix’s Rise
• Netflix became the world leader in streaming.
• Today, Netflix is worth over $200 billion, while Blockbuster has only one store
left in Bend, Oregon, as a nostalgic symbol.
The Lesson:
• Blockbuster failed because it was blinded by the false consensus effect —
assuming customers wanted what they thought was normal.
• Netflix succeeded because it listened to real customer behavior, embraced
technology, and adapted fast.
Implicit bias
Implicit bias
• Bias = preference or prejudice for or against something.
• Implicit = hidden, unconscious, automatic.
• Implicit bias means unconscious attitudes or stereotypes that
affect our thoughts, decisions, and actions without us realizing it.
• They differ from explicit biases (conscious beliefs) — you can
believe in equality but still act in ways shaped by implicit
associations.
Examples
• A teacher may (without realizing) call on boys more often than
girls in math class, assuming boys are "better" at math.
• In hiring, a manager might prefer resumes with “common” names
(like John, David) over minority names (like Jamal, Priya) even
when qualifications are the same.
• In daily life, you might feel safer sitting next to someone who looks
like you, compared to someone from a very different background.
How implicit bias works (the cognitive
mechanics)
• Automatic associations: Our brains build mental links (e.g., “X = Y”)
from repeated exposure from media, family, culture. These links fire
quickly and automatically.
• Social categorization: We automatically sort people into groups (age,
gender, race, job title). Grouping simplifies information processing but
promotes stereotyping.
• Heuristics and shortcuts: When decisions are fast or attention is
limited, we rely on mental shortcuts that let implicit biases influence
outcomes.
• Priming & context: Environment and cues (a person’s clothing, name
on a CV, a headline) can activate stereotypes and shape responses
Where implicit bias comes from
• Socialization: Family, peers, and media shape repeated pairings
• Personal experience: Repeated encounters can strengthen
specific associations.
• Institutional reinforcement: Policies, norms, and historical
patterns can normalize biased expectations
How researchers measure it
• Implicit Association Test (IAT): Reaction-time task that measures
how quickly people pair social groups with positive/negative words
— faster pairings suggest stronger implicit association.
• Affect Misattribution Procedure (AMP) and priming tasks:
Other lab methods that reveal automatic associations.
• Behavioral/audit studies: Field tests (e.g., identical resumes with
different names, matched-caller studies) show real-world
consequences of bias.
• Observational & experimental designs: Track decisions (hiring,
sentencing, clinical decisions) to see patterns consistent with bias.
How to reduce implicit bias
• Individual-level
• Awareness + reflection: Knowing you have biases is the first step
• Slow down decisions: Create friction for quick judgements (pause,
collect evidence).
• Individuation: Focus on a person’s specific attributes and
achievements instead of group stereotypes.
• Perspective-taking: Imagine another person’s experience — can
reduce automatic negative associations.
• Counter-stereotype thinking: Consciously rehearse examples that
contradict stereotypes (e.g., imagine female leaders).
Institutional-level (systems that actually change outcomes)
• Structured decision processes: Use standardized interview questions,
scoring rubrics, and objective performance criteria.
• Blind review: Remove names/photos/other demographic cues during
resume screening or initial grading.
• Diverse decision panels: Multiple perspectives reduce single-person
biases.
• Data & audits: Track outcomes (hiring rates, promotion, discipline) and
set targets; publish results.
• Bias interrupters: Small process changes (e.g., default diverse shortlists,
standardized reference checks).
• Accountability & incentives: Leadership commitment, tied evaluation
metrics, and consequences for biased practices.
• Long-term learning: Combine training with policy changes, monitoring,
and practice—training alone is weak.
Gary S. Becker’s formula on
penalty for violations
 Gary S. Becker
• Gary S. Becker (Nobel Prize-winning economist, 1968) applied
economic thinking to crime and violations of law.
• He said: people weigh costs vs. benefits before committing a crime,
just like in business decisions.
• So, if the expected cost (penalty) is greater than the expected
benefit, rational people will avoid crime.
• Becker treats crime (or any rule-breaking) as a rational choice:
people compare the expected benefits of breaking a rule with the
expected costs and then decide.
• If expected benefits exceed expected costs, a rational actor will
break the rule.
The Formula
• In simple form:
• Expected Penalty (EP) = 𝑝 × 𝐹
Where:
• p = probability of being caught
• F = severity of fine/punishment, penalty (fine, monetary
equivalent of punishment
• A person will choose to violate if:
• Benefit 𝐵 > Expected Penalty 𝐸𝑃
 Example
• Benefit 𝐵 = ₹100,000.
• Probability of being caught 𝑝 = 0.1(10%).
• Fine 𝐹 = ₹500,000.
Compute expected penalty:
• Multiply 𝐹by 𝑝:
500,000 × 0.1 = 50,000.
• So expected penalty 𝐸𝑃 = ₹50,000.
• Compare benefit vs expected penalty:
• 𝐵 − 𝐸𝑃 = 100,000 − 50,000 = 50,000.
• Result: 50,000 > 0→ expected benefit still positive → rational
actor may commit the violation.
Example B — increase detection
• Same numbers but 𝑝 = 0.5(50%):
• 500,000 × 0.5 = 250,000.→ 𝐸𝑃 = ₹250,000.
• 𝐵 − 𝐸𝑃 = 100,000 − 250,000 = −150,000.
• Result: negative → will not commit.
Example C — include moral/non-monetary
cost (shame, stigma, future employment loss)
Let 𝐵 = ₹200,000,
𝑝 = 0.2,
𝐹 = ₹400,000,
moral cost 𝐶 = ₹10,000.
• 400,000 × 0.2 = 80,000.
• 𝐸𝑃 = 80,000 + 10,000 = 90,000.
• 𝐵 − 𝐸𝑃 = 200,000 − 90,000 = 110,000.
• Result: positive → may commit.
Policy implications (practical
takeaways)
• Raise 𝑝when enforcement is relatively cheap (surveillance tech, audits).
• Raise 𝐹when enforcement is costly or when you want to avoid continuous
high surveillance — but be mindful of fairness and ability to pay.
• Mix tools: fines, imprisonment, monitoring, reputational sanctions, license
revocations — different penalties target different offender incentives.
• Target high-return, low-risk crimes: offenses with high benefits and low
detection (tax evasion, pollution) require stronger enforcement.
• Design penalties to be proportional and enforceable: extremely high fines
that aren’t collectible are ineffective. Use income-based fines or
imprisonment alternatives where appropriate.
• Consider non-monetary sanctions (loss of license, public disclosure) —
these change the 𝐶term (moral/social costs).
Limitations & criticisms of Becker’s
approach
• Over-rationalization: Not all crimes are rational cost-benefit choices
(crimes of passion, impulsive acts, severe addiction).
• Moral motives and norms: Social norms and moral beliefs often
dominate the decision; Becker’s model underweights
normative/collective effects.
• Measurement problems: 𝑝and true benefits are hard to observe
empirically; estimating elasticities of crime to fines/enforcement is
difficult.
• Equity concerns: Flat fines are regressive; wealthy offenders may not
be deterred by fines large enough to deter poor offenders.
• Unintended responses: Increasing 𝐹might push offenders to hide
assets, become more violent (to avoid capture), or shift to different
crimes.
Summary
• Becker’s model treats crime as a rational economic choice:
offenders compare the benefit of crime to its expected penalty 𝑝 ⋅
𝐹(plus moral/social costs).
• Policy can deter crime by raising detection probability 𝑝,
increasing penalties 𝐹, or changing moral/social costs 𝐶.
• Practical implementation requires balancing enforcement costs,
fairness, and behavioral realities (risk preferences, norms,
bounded rationality).
Hong Kong Model of
Business Ethics
Background
• In the 1990s, Hong Kong faced widespread corruption in both
government and business.
• To tackle this, the Independent Commission Against Corruption
(ICAC) was established.
• The ICAC introduced a three-pronged model that later came to be
known as the Hong Kong Model of Business Ethics.
Why the model was developed
• Corruption is not only illegal but systemic: it thrives where
opportunities, weak controls, and social tolerance exist.
• Punishment alone (prosecution) reduces incidents but doesn’t
remove opportunities or change norms.
• A multi-front strategy seeks immediate deterrence and long-term
cultural change so corruption becomes both risky and socially
unacceptable.
Three-pronged approach
• (1) strong law enforcement,
• (2) robust prevention, and
• (3) broad education and public engagement.

• This approach is most closely associated with Hong Kong’s

Independent Commission Against Corruption (ICAC), which treats
corruption as a social problem to be attacked by punishment and
by changing systems and attitudes.
A. Law enforcement (restriction and
prosecution)
• Independent investigative power: A central agency with the
legal mandate to investigate corruption across public and private
sectors.
• Prosecution authority or close coordination with prosecutors to
convert investigations into convictions.
• High visibility of enforcement: publicised investigations and
prosecutions that signal consequences.
• Support structures: witness protection, asset tracing, cross-
border cooperation where needed.
B. Prevention (closing opportunity and
redesigning systems)
• Organisational audits & risk assessments: Identify where bribery or
tampering are likely to occur (procurement, licensing, inspections).
• Redesign of processes: introduce transparent tendering, multiple
approvers, rotation of sensitive roles, e-procurement, and segregation
of duties.
• Internal controls: accounting controls, mandatory disclosures,
conflict-of-interest rules, supplier due diligence.
• Advisory services: the anti-corruption agency advises government
departments and private firms on how to close loopholes—practical
guidance rather than only punitive action.
• Whistleblower channels: secure, anonymous reporting mechanisms
with legal protections.
C. Education and public outreach
(culture and norms)
• Public campaigns: mass media, school programs, and workplace
outreach to change social norms about bribery.
• Business training: mandatory or encouraged ethics/compliance
training for firms, plus model codes of conduct.
• Community engagement: talks, seminars, partnerships with
business chambers and civil society.
• Promoting “tone at the top”: working with senior management
to make ethical behavior a corporate priority.
Practical measures businesses adopt
under the model
Businesses translate the model into internal practices, for example:
• Clear anti-bribery policies (gifts, hospitality, facilitation payments).
• Standardized procurement procedures and e-tender portals to reduce
face-to-face favoritism.
• Due diligence on agents, partners and suppliers (KYC, AML checks).
• Whistleblowing hotlines and non-retaliation policies.
• Regular compliance audits and external certification of controls.
• Ethics training tied to performance evaluations and promotion criteria.
• Conflict-of-interest disclosures and limits on political donations.
• These measures reduce the firm’s exposure to corruption risk, protect
reputation, and make business sustainable.
Why the three-pronged mix is stronger
than punishment alone
• Deterrence + design + norms: enforcement raises cost;
prevention removes opportunities; education changes
preferences.
• Synergy: prevention makes enforcement easier (clear records,
audit trails), and enforcement gives weight to educational
messages.
• Sustainability: culture change reduces the need for constant
prosecutions; firms adopt self-policing behaviours.
Criticisms and limitations
• Risk of politicization: If independence is weak, anti-corruption bodies
can be used for political ends.
• Human rights and due process concerns: Heavy-handed
investigations risk procedural unfairness if oversight is poor.
• Cost and complexity: Building and enforcing prevention systems is
resource-intensive—smaller firms may struggle.
• Box-ticking compliance: Firms may do minimal “checklist”
compliance without real cultural change.
• Cross-border challenges: Corruption often has international elements
(offshore accounts, foreign intermediaries) that complicate
enforcement.
Summary
• The Hong Kong model pairs strong, independent enforcement
with systemic prevention and public education.
• Its strength is treating corruption as a problem of incentives,
opportunity, and social norms — not just individual crime.
• Adaptation elsewhere requires independence, resources,
prevention capacity, and persistent public engagement.
Virtue theory
Virtue Ethics
• Virtue Ethics is an approach to moral philosophy that emphasizes
character and virtues (good habits or traits) rather than rules
(deontology) or consequences (utilitarianism).
• Instead of asking “What should I do?” virtue ethics asks “What kind
of person should I be?”
• Focus on Character
A morally good person cultivates virtues such as honesty, courage,
compassion, justice, humility, and wisdom.
• Virtue as a Habit
Virtues are not one-time actions but practiced habits.
• Human Flourishing (Eudaimonia)
The goal of life is eudaimonia, often translated as flourishing, well-
being, or living a fulfilled life.
Virtues are the means to achieve this flourishing.
• Practical Wisdom (Phronesis)
Good judgment helps apply virtues appropriately in different
situations.
For example, generosity doesn’t mean giving away everything, but
giving wisely according to context.
Origin:
• Ancient Greece: Rooted in Aristotle’s Nicomachean Ethics.
• Further developed by Plato, later revived in modern times
by philosophers like Alasdair and Philippa Foot.
Example:
• Suppose someone finds a wallet full of money.
• A deontologist says: “Follow the rule—return it.”
• A utilitarian says: “Return it if it maximizes happiness.”
• A virtue ethicist says: “An honest and compassionate
person would return it, because that reflects good
character.”
In short, Virtue Ethics is about moral character, not just
moral choices.
Plato Gave four Cardinal virtues of a “good man”: Wisdom, Courage,
Temperance, Justice.
Aristotle •Proposed “Golden Mean”. Which means avoiding extreme good
and extreme bad.
•Avoiding altruism (Maximum happiness to others while ignoring
yours) and avoiding hedonism (maximum pleasure for yourself).
•Buddhist philosophy of “Madhyama-pratipad” proposes the same
‘middle-way’.
•Although it can’t be applied to all cases. e.g. if someone alleges
“you’re a mad-man”, you can’t say “I’m half-mad”!