Chapter 2.
The Different Normative Ethical Theories
Objectives:
a. Explain the key concepts, principles, and assumptions of major normative ethical theories
relevant to business decision-making.
b. Differentiate the ethical perspectives of Kohlberg, Machiavelli, Kant, Rawls, Hobbes, Ayn
Rand, and other major theorists in the context of moral reasoning and business practice.
c. Demonstrate the ability to apply appropriate ethical theories in proposing morally sound
solutions to real-world business situations.
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Ethics plays a vital role in shaping business decisions, as every choice made by individuals
and organizations carries moral implications. To better understand how people and institutions
determine what is right or wrong, it is important to explore the foundations of normative ethical
theories. These theories provide structured ways of thinking about morality, guiding decision-
makers in balancing self-interest, fairness, responsibility, and the greater good.
In this chapter, we will study the key concepts and assumptions behind major ethical
perspectives, including the moral reasoning of Kohlberg, Machiavelli, Kant, Rawls, Hobbes, Ayn
Rand, and other influential thinkers. By comparing these perspectives, students will gain insights
into how different approaches to ethics can shape judgments in business and professional
practice.
Kohlberg’s Stages of Moral Development
Lawrence Kohlberg explained that people’s ability to reason about moral issues develops
in stages. He divided these into three levels: pre-conventional, conventional, and post-
conventional morality.
1. Preconventional Level (Childhood)
Focus: Decisions based primarily on self-interest and avoiding punishment.
Stage 1: Obedience and Punishment Orientation (avoiding punishment). Moral decisions are
driven by the desire to avoid punishment. Individuals perceive rules as fixed and absolute, without
considering intent. Right and wrong are determined by direct consequences, especially
punishment. For example, a child doesn’t take cookies because they fear being scolded by their
parent.
Stage 2: Self-Interest Orientation (personal benefit). Individuals recognize varying viewpoints but
base decisions primarily on self-interest. Actions are judged right if they serve personal needs or
involve equal exchange (“what’s in it for me?”). Reciprocity is transactional, not moral. For
example, a child helps clean up toys because they expect a reward afterward.
2. Conventional Level (Adolescence and Adulthood)
Focus: Decisions guided by social expectations, relationships, laws, and societal order.
Stage 3: Interpersonal Accord and Conformity (meeting social expectations). Morality is guided
by social approval and maintaining relationships. Individuals aim to be seen as “good” by others,
emphasizing trust, loyalty, and conformity to social roles and expectations. Actions reflect the
desire to please others. For example, a teenager agrees to volunteer because friends view
volunteering positively.
Stage 4: Authority and Maintaining Social Order (obeying laws and maintaining social order).
Individuals prioritize law, order, and societal stability. Moral decisions uphold laws and authority,
viewing societal rules as critical for collective well-being. Maintaining social order and fulfilling
obligations is paramount. For example, an adult decides not to speed because it’s important to
obey traffic laws to maintain safety.
3. Postconventional Level (Advanced Moral Reasoning)
Focus: Decisions guided by higher ethical principles and individual rights beyond societal
laws.
Stage 5: Social Contract and Individual Rights (social agreements and prioritizing human life).
The child/individual becomes aware that while rules/laws might exist for the good of the greatest
number, there are times when they will work against the interest of particular individuals. The
issues are not always clear-cut. For example, a citizen participates in a peaceful protest to
advocate for human rights, despite potential legal consequences.
Stage 6: Universal Ethical Principles (universal ethical principles – justice, human rights). People
at this stage have developed their own set of moral guidelines, which may or may not fit the law.
The principles apply to everyone. E.g., human rights, justice, and equality. The person will be
prepared to act to defend these principles even if it means going against the rest of society in the
process and having to pay the consequences of disapproval and or imprisonment. Kohlberg
doubted few people had reached this stage. For example, a whistleblower exposes corruption in
their company, recognizing the greater good outweighs personal risk.
The Machiavellian Principles
“The ends justify
the means”
Niccolò Machiavelli, in his work The Prince, written in the 16th century. Machiavelli
wrote the book to describe how leaders could use strategies to gain power and prestige.
According to his principles, morality is often secondary to results, and leaders may sometimes
use manipulation, deception, or ruthless strategies if these actions help them achieve stability and
success. Machiavelli argued that while leaders should appear virtuous, they must be willing to act
pragmatically to maintain control and order. In business, Machiavellian principles are evident
when companies adopt aggressive strategies such as hostile takeovers, harsh cost-cutting
measures, or manipulative advertising campaigns in order to dominate markets. This approach
emphasizes that sometimes success in competitive environments requires tough and unpopular
choices.
Key Ideas:
• Leaders must be cunning, decisive, and sometimes ruthless.
• “The ends justify the means” – achieving goals can excuse questionable actions.
• Appear virtuous but act pragmatically.
Machiavellian leaders maximize their personal power
Machiavelli encourages leaders to lie, manipulate and use coercive persuasion to serve their own
needs. Individuals who score high on Machiavellianism are not necessarily in a position of formal
power but engage in techniques to boost their own self-worth. They are skilled in impression
management techniques with a natural talent for influencing others with the main aim of
maximizing opportunities for their own personal power.
Moral and ethical standards do not matter to Machiavellians
Machiavellians have little regard in adhering to moral or ethical standards. They focus on money,
power and competition and place little emphasis on community building, self-care, and family
commitment; they aim to win at any cost (Spielberger & Butcher, 2013). Within the workplace,
Machiavellians engage in flattery, deceit, coercion and can be abusive (Calhoon, 1969).
Utilitarianism
“The greatest good for the greatest number.”
Utilitarianism is a tradition of ethical philosophy that's associated with Jeremy Bentham
(1747-1832) and John Stuart Mill (1806-1873), two British philosophers, economists, and political
thinkers. The theory holds that an action is right if it tends to promote happiness. It's wrong if it
tends to produce sadness or the reverse of happiness for everyone affected by it. You display
utilitarianism at work when you take action to ensure that the office is a positive environment for
your co-workers, and then you make it so for yourself.
Utilitarianism is a consequentialist theory which argues that the morally right decision is
the one that produces the greatest happiness for the greatest number of people. It focuses on
weighing the benefits and harms of different actions to determine which option maximizes overall
well-being. In the business context, utilitarian reasoning is often used in cost-benefit analyses,
policy-making, and corporate social responsibility. For example, a company might decide to invest
in environmentally friendly technologies even if the costs are high because the long-term benefits
to society outweigh the financial burden. Utilitarianism provides a practical framework for
balancing profitability with the welfare of employees, customers, and the wider community.
Utilitarianism promotes the idea of achieving the greatest good for the greatest number,
focusing on maximizing benefits and minimizing harm. In business, this means striving to improve
welfare and making decisions based on practical, calculative outcomes rather than emotions.
Purchases or actions are valued for their utility and rational benefits.
However, utilitarian ethics face limitations. It can be difficult to apply in competitive, profit-
driven environments, and it often frames morality in black-and-white terms without considering
justice or individual rights. Predicting the future consequences of actions is uncertain, and
utilitarian reasoning can justify questionable decisions—such as sacrificing one life to save many.
In practice, utilitarianism may also fuel greed and harsh competition that undermine the social
good.
Despite these challenges, utilitarianism remains influential because of its simple and
practical method of evaluating choices, though it continues to evolve into refined variations that
measure benefits in terms of personal preferences, welfare, and economic costs and gains.
The Principle of Rights and Virtues: The Kantian Ethics
"I ought never to act except in such a way that I could also will that my maxim (principle)
should become a universal law."
Immanuel Kant proposed that moral actions should
be guided not by their outcomes but by duties, universal
laws, and respect for human dignity. His principle,
known as the categorical imperative, states that one
should only act according to a maxim that can be
applied as a universal law. This means that people must
never be treated merely as a means to an end but
always as ends in themselves. In business, Kantian
ethics emphasizes honesty, fairness, and respect for
individual rights. For example, a company following
Kantian principles would refuse to deceive customers
with false advertising, even if dishonesty could increase profits. The focus is on doing what is
morally right, regardless of the consequences.
John Rawls Principles of Justice
“Veil of Ignorance”
John Rawls, in his book A Theory of Justice, argued that fairness should be the
foundation of social institutions and moral reasoning. He introduced the concept of the
“veil of ignorance,” where people design rules without knowing their own position in
society, ensuring fairness and impartiality. Rawls identified two key principles: the Liberty
Principle, which guarantees equal basic rights for all, and the Difference Principle, which
allows inequalities only if they benefit the least advantaged members of society. In
business, these principles are applied through policies that promote equality, diversity,
and fair opportunities in the workplace. For instance, companies may implement
scholarship programs, inclusive hiring practices, or equitable pay structures to ensure that
disadvantaged groups are not left behind.
The Moral Positivism of Hobbes
“Humans should live
in peace under
a sovereign power so
as to avoid conflict
within the ‘state of
nature’”
Thomas Hobbes
Thomas Hobbes believed that human beings are naturally self-interested and
competitive, leading to conflict and disorder without authority. To prevent this “state of
nature,” societies create a social contract and establish governing laws. Hobbes’ moral
positivism emphasizes that morality is not innate but is instead defined by the rules and
regulations set by authority. In business, this theory highlights the importance of corporate
policies, government regulations, and legal frameworks to maintain order and prevent
exploitation. For example, companies comply with labor laws, safety standards, and
contractual agreements not only to avoid punishment but also to create stability in their
operations. Hobbes’ view suggests that ethical business practices often depend on
enforced rules and systems of authority.
Divine Command Ethics
Divine Command Theory argues that morality is rooted in God’s will, and actions
are right or wrong depending on whether they align with divine commands. This
perspective emphasizes virtues such as honesty, integrity, compassion, and stewardship
as moral obligations given by a higher authority. In business, divine command ethics can
be seen in practices shaped by religious values, such as avoiding corruption, treating
workers fairly, and practicing honesty in transactions. For example, a business leader
guided by this theory may refuse to engage in bribery or fraud because it violates both
the law and their faith-based moral principles. This approach highlights how religious
beliefs can serve as a foundation for ethical behavior in the corporate world.
Ethical Egoism of Ayn Rand
Ayn Rand’s ethical egoism, rooted in her philosophy of Objectivism, holds that
individuals should act in their rational self-interest. Unlike selfishness, which disregards
others, ethical egoism emphasizes pursuing one’s own happiness and success in ways
that can also benefit society. Rand argued that independence, ambition, and innovation
are moral virtues because they allow individuals to thrive while contributing to progress.
In business, this theory is reflected in entrepreneurship, competition, and personal
achievement. For example, a business owner may strive to maximize profits not simply
out of greed, but as a way to create jobs, introduce new products, and stimulate economic
growth. Ethical egoism views self-interest as a driving force for both personal fulfillment
and broader social advancement.