Business Ethics
Unit 4: Justice &
Economic
Distribution
BUSE1101
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• Definition of justice
• Principles of justice
• Types of Justice:
• Distributive Justice:
• Egalitarianism - Justice based on
equality
• Capitalism - Justice based on
control
Content • Libertarianism - Justice based on
freedom
• Liberal egalitarianism - Justice
based on fairness
• Retributive Justice
• Compensatory Justice
• Rawls two principles of justice
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What is Justice?
• Justice in business ethics
refers to the principles and
standards that govern fairness
in the treatment of individuals
within a business context
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The Nature of Justice
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The Nature of Justice
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Compensatory
Justice
• Compensatory justice is a principle
within the broader framework of justice
that focuses on providing fair
compensation or restitution to
individuals who have suffered harm or
loss due to the actions of others.
• This concept is particularly relevant in
business ethics, where organizations
may be held accountable for their
actions that result in negative
consequences for stakeholders,
including employees, customers, and
communities.
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Example
• A corporation has caused
environmental damage due to its
operations. Suppose a manufacturing
company discharges toxic waste into a
nearby river, resulting in health issues
for local residents and destruction of
the ecosystem.
• In this scenario, compensatory justice
would require the company to take
responsibility for its actions by
providing financial compensation to
affected individuals and communities.
• This could include covering medical
expenses for health problems
caused by pollution, funding
community rehabilitation projects,
and investing in environmental
restoration efforts.
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Types of harm In a business context
Economic Loss: This includes lost wages due to wrongful
termination, financial losses from defective products, or
damages incurred from unethical business practices.
Emotional Distress: Employees or customers may
experience psychological harm due to discrimination,
harassment, or other unethical behaviors within an
organization.
Reputational Damage: Businesses may also face claims for
compensatory justice if their actions lead to reputational
harm for individuals or communities.
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Mechanisms for Compensation
Monetary Compensation: This is the most common form of
restitution where affected parties receive financial payments
equivalent to their losses.
Restorative Practices: In some cases, businesses may engage in
restorative practices that focus on repairing relationships and
addressing the needs of those harmed rather than solely
providing monetary compensation.
Policy Changes: Organizations may implement changes in
policies or practices as part of compensatory measures to
prevent future occurrences of harm.
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Cases –
Compensatory
Justice Served
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Volkswagen Emissions Scandal (2015)
In 2015, Volkswagen was found to have installed software in its diesel vehicles
designed to cheat emissions tests, leading to significant environmental harm and
consumer deception.
Following investigations and lawsuits from various stakeholders—including
consumers, states, and federal agencies—Volkswagen agreed to a settlement that
included approximately $14.7 billion in penalties and compensation.
This settlement involved direct payments to affected consumers who purchased
vehicles with defeat devices, as well as funding for environmental remediation
projects aimed at reducing pollution caused by these vehicles.
The compensatory measures taken by Volkswagen serve as an example of how
businesses can be held accountable for unethical practices that result in harm to
consumers and society at large.
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• The Deepwater Horizon oil spill is one of the largest
environmental disasters in U.S. history, resulting
from a blowout on an offshore drilling rig operated
by BP.
BP • The spill released millions of barrels of oil into the
Gulf of Mexico, causing extensive damage to
Deepwat marine and coastal ecosystems and significantly
impacting local economies reliant on fishing and
er tourism.
• In response to this disaster, BP established a $20
Horizon billion fund for claims related to economic damages
caused by the spill. Affected businesses and
Oil Spill individuals could file claims for lost income and
property damage. The compensation process was
(2010) overseen by an independent claims administrator,
ensuring that those harmed received financial
restitution for their losses.
• This case illustrates compensatory justice as it
directly addressed the economic impact on
communities affected by BP’s negligence.
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• Four largest tobacco companies in the United States
entered into a landmark settlement with 46 states,
known as the Tobacco Master Settlement Agreement
The (MSA).
• This agreement was reached after years of litigation
Tobacco over the health care costs associated with smoking-
related illnesses.
Master • The states sought compensation for these costs,
which they argued were incurred due to the
Settleme deceptive marketing practices of tobacco companies.
• Under the MSA, tobacco companies agreed to pay an
nt estimated $206 billion over 25 years to cover state
healthcare costs related to smoking. Additionally,
Agreeme they committed to changing their advertising
practices and funding anti-smoking campaigns.
nt (1998) • This case exemplifies compensatory justice as it
provided financial restitution to states burdened by
healthcare expenses while also aiming to reduce
future harm from tobacco use.
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Retributive or Corrective Justice
Corrective justice pertains to rectifying wrongs or harms
caused by unfair practices or actions within a business
context.
This involves holding individuals or organizations
accountable for unethical behavior and providing
appropriate remedies for those affected by such actions.
For instance, if an employee is wrongfully terminated or
discriminated against, corrective justice would require the
organization to take steps to address the harm done.
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• In the business context,
retributive justice can be
illustrated through the
enforcement of corporate ethics
Retributiv and compliance policies.
• When an employee engages in
e Justice unethical behavior, such as
embezzlement or fraud, the
organization has a duty to impose
appropriate penalties that reflect
the severity of the wrongdoing.
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Steps for Retributive Justice
1. Identification of
Wrongdoing: 2. Investigation:
• The first step is • Once wrongdoing is
recognizing that a identified, a thorough
violation has occurred. investigation is conducted
• For example, if an to gather evidence and
employee is found to have understand the extent of
manipulated financial the misconduct.
records to inflate sales • This may involve
figures for personal gain, reviewing financial
this act constitutes a documents, interviewing
serious breach of trust
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witnesses, and consulting18
and ethical standards. with legal counsel.
3. Determining Consequences:
• After establishing that misconduct has occurred, the
organization must decide on an appropriate response.
• In line with retributive justice principles, this response
should be proportional to the offense committed.
• For instance, if the embezzlement resulted in significant
financial loss to the company or its stakeholders, severe
consequences such as termination of employment and
potential legal action may be warranted.
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Steps for Retributive Justice
4. Imposing Punishment: 5. Restoring Order:
• The next step involves • Retributive justice aims to
executing the decided restore balance within the
punishment. organization by reinforcing
• In this case, terminating the ethical standards and ensuring
that all employees understand
employee’s contract not only
that violations will lead to
serves as a consequence for
serious repercussions.
their actions but also acts as a
deterrent to other employees • This can include revising
who might consider similar training programs on ethics and
unethical behavior in the compliance or implementing
future. stricter oversight measures.
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Cases –Retributive
Justice Served
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Enron Scandal
(2001)
• The Enron scandal is one of the most infamous
cases of corporate fraud in history.
• Enron Corporation, once a highly regarded
energy company, engaged in widespread
accounting fraud to hide its financial losses
and inflate stock prices.
• When the truth emerged, it led to the
company’s bankruptcy and significant
financial losses for investors and employees.
• Retributive justice was served when several
top executives were prosecuted and
sentenced to prison for their roles in the fraud.
• For example, Jeffrey Skilling, former CEO, was
sentenced to 24 years in prison (later reduced)
for conspiracy and fraud.
• This case highlighted the need for
accountability at the highest levels of
corporate leadership.
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Volkswagen Emissions
Scandal (2015)
• Volkswagen (VW) faced severe repercussions after
installing software in diesel vehicles designed to
cheat emissions tests.
• This deception not only violated environmental
regulations but also misled consumers about the
vehicles’ performance and environmental impact.
• In response, VW faced numerous lawsuits and
regulatory penalties amounting to billions of
dollars.
• Key executives were held accountable; for
instance, former CEO Martin Winterkorn resigned
and faced criminal charges related to fraud and
conspiracy.
• The retributive justice served here included hefty
fines imposed by regulatory bodies as well as civil
suits from affected consumers.
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Distributive Justice
Distributive justice focuses on the fair allocation of resources,
benefits, and burdens among stakeholders.
In a business setting, this means ensuring that employees are
compensated fairly for their work, that customers receive value
for their purchases, and that communities impacted by business
operations are treated justly.
The principle asserts that individuals should receive what they
are due based on relevant criteria such as need, contribution, or
effort.
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Cases –
Distributive
Justice Served
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One notable example is the case of Salesforce, a cloud-
based software company.
In 2016, CEO Marc Benioff announced that the
company would conduct a comprehensive pay audit to
Pay address gender pay disparities within the organization.
Equity The audit revealed that women were being paid less
Initiatives than their male counterparts for similar roles.
As a result, Salesforce committed to spending $3
million to rectify these inequities by adjusting salaries
accordingly.
This initiative exemplifies distributive justice as it
aimed to ensure that all employees received fair
compensation based on their contributions rather than
their gender.
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Community Investment Programs
Starbucks has also made strides toward distributive justice
through its community investment programs aimed at supporting
local economies where it operates.
The Starbucks Foundation invests in initiatives that promote
education and job training for underserved communities, thereby
redistributing resources back into those communities from which
they draw customers and labor.
This practice not only enhances community welfare but also
fosters goodwill towards the brand.
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4 Principles of
Distributive
Justice
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Egalitarianism -
Justice based on
equality
• Egalitarianism is a philosophical
perspective that advocates for
equal rights and opportunities for
all individuals, emphasizing the
importance of equality in social,
political, and economic contexts.
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Egalitarianism
Examples
• Egalitarianism can be
seen in policies that
promote equal access to
education, healthcare,
and employment
opportunities.
• For instance, affirmative
action programs aim to
level the playing field for
historically marginalized
groups by ensuring they
have equal opportunities
in hiring and education.
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Capitalism - Justice based on
control/contribution
Justice in capitalism
Capitalism is an can be seen as related
economic system to the control of
where private resources and wealth
ownership and control distribution, often
of production are leading to disparities
emphasized. based on market
dynamics.
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Capitalism
• In a capitalist system, examples of
justice based on control can be
observed in corporate governance
structures where shareholders
exert control over company
decisions.
• For example, large corporations
often prioritize profit maximization
for their shareholders, which can
lead to significant wealth
accumulation for a few individuals
while others may face economic
hardship.
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Libertarianism - Justice
based on freedom
• Libertarianism prioritizes individual
freedom and autonomy, advocating
for minimal government
intervention in personal lives and
economic activities.
• Justice is viewed through the lens of
protecting personal liberties.
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An example is the legalization of
marijuana in various states in the
U.S., where libertarians argue that
individuals should have the freedom
to make their own choices regarding
drug use without government
interference.
Example
Another example is the push for
privacy rights and data protection
laws that allow individuals more
control over their personal
information without state oversight.
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• Liberal egalitarianism combines
Liberal principles of liberalism with
egalitariani egalitarian ideals, focusing on
fairness in social justice while
sm - Justice allowing for some inequalities that
based on benefit the least advantaged
members of society.
fairness
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Example
• Liberal egalitarianism is reflected in social
welfare programs designed to assist those
who are disadvantaged while still allowing for
some degree of inequality that benefits
society as a whole.
• For instance, progressive taxation systems
where higher earners pay a larger percentage
of their income in taxes help fund public
services like education and healthcare, aiming
to create a fairer society while recognizing
that some level of income disparity may
incentivize productivity and innovation.
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Procedural Justice
Procedural justice emphasizes the fairness of the
processes used to make decisions within an organization.
This includes transparency in decision-making processes,
equal opportunity for all stakeholders to participate, and
consistency in how policies are applied.
When procedures are perceived as fair, it enhances trust
among employees and other stakeholders and contributes
to a positive organizational culture
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Example
• Procedural justice in business ethics can
be observed in performance appraisal
systems within organizations.
• When employees are evaluated based
on their performance, it is essential
that the process used for evaluation is
transparent, consistent, and
equitable.
• For instance, if a company implements a
performance review system that involves
clear criteria for assessment, allows
employees to provide input about their
own performance, and ensures that all
employees are evaluated by the same
standards regardless of personal biases
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or favoritism, this reflects procedural 45
Cases-
Procedural
Justice Served
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• In November 2018, thousands of Google employees
participated in a walkout to protest the company’s handling
of sexual harassment allegations against high-ranking
executives.
• In response to this action, Google committed to improving
its policies related to sexual misconduct and announced
changes such as ending forced arbitration for sexual
harassment claims.
Google’s • The company held town hall meetings where employees
Employee could express their views and contribute to shaping new
policies.
Walkout • This approach exemplified procedural justice as it allowed
employees to participate actively in discussions about
workplace policies affecting them directly.
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This Photo by Unknown Author is licensed under CC BY-S
Unilever’s Sustainable Living Plan
• Unilever has been recognized for its commitment
to sustainability through its Sustainable Living
Plan.
• The company engaged various stakeholders—
including employees, suppliers, and consumers—
in developing this plan.
• By conducting extensive consultations and
involving diverse perspectives in decision-making
processes, Unilever ensured that all voices were
heard.
• This participatory approach not only enhanced
trust among stakeholders but also led to better-
informed decisions that aligned with broader
societal values. This Photo by Unknown Author is licensed under CC BY-SA-NC
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Rawl’s Theory of Justice
• John Rawls, a prominent 20th-century
philosopher.
• Best known for his contributions to
political philosophy and ethics,
particularly through his seminal works
“A Theory of Justice” (1971) and
“Justice as Fairness: A Restatement”
(2001).
• His theories have significant
implications for contemporary
discussions of justice in various
spheres, including the business world.
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Rawl’s Theory of Justice
• Rawls’s two principles of justice
1. The principle of equal basic
liberties
2. The difference principle
These principles provide a
framework for assessing economic
distribution and social cooperation.
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The Principle of Equal Basic Liberties
• This principle asserts that each person has an equal
right to a fully adequate scheme of equal basic liberties,
which includes freedoms such as speech, assembly, and
conscience.
• In the context of business, this principle emphasizes the
importance of ensuring that all individuals have access
to opportunities without discrimination or coercion.
• Businesses are expected to uphold these liberties by
fostering inclusive environments where diverse voices
can be heard and respected.
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The Difference Principle
This principle suggests that social and economic
inequalities are permissible only if they benefit the
least advantaged members of society.
In practice, this means that businesses should strive
not only for profit maximization but also for equitable
outcomes that improve the welfare of disadvantaged
groups.
This could manifest in policies such as fair wages,
employee benefits, and corporate social responsibility
initiatives aimed at community development.
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Relevance of Rawl’s Theory Today
• In today’s globalized economy, Rawls’s theories can be applied to assess
corporate practices regarding justice and economic distribution. For instance:
• Corporate Social Responsibility (CSR): Many companies adopt CSR strategies that align
with Rawls’s difference principle by investing in local communities or ensuring fair labor
practices across their supply chains.
• Companies like Patagonia exemplify this approach by prioritizing environmental
sustainability while also advocating for workers’ rights.
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Relevance of Rawl’s Theory Today
• Economic Inequality: The growing concern over income
inequality has prompted discussions about how
businesses contribute to or mitigate these disparities.
• Companies are being called upon to evaluate their
compensation structures critically; those that pay living
wages or provide comprehensive benefits align more
closely with Rawlsian principles.
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Relevance of Rawl’s Theory Today
• Diversity and Inclusion Initiatives: Organizations
increasingly recognize the importance of creating
equitable workplaces that reflect diverse backgrounds.
• By implementing policies aimed at reducing disparities
in hiring and promotion practices, businesses can honor
Rawls’s commitment to equal basic liberties.
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Cases Relevant to
Justice and Economic
Distribution
Several cases illustrate how Rawls’s theories
apply in real-world scenarios
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Nike’s Labor
Practices
• Nike faced criticism for its labor
practices in developing countries
where workers were paid low
wages under poor conditions.
• Applying the difference
principle would suggest that
Nike should enhance its labor
standards to ensure better
conditions and fair
compensation for its workers.
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Starbucks’ Commitment
to Employee Benefits:
• Starbucks has implemented policies
providing healthcare benefits even for
part-time employees.
• This aligns with both principles by
promoting equal basic liberties through
fair treatment while also supporting
disadvantaged workers who may not
have access to such benefits
elsewhere.
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Amazon’s Wage
Policies
• Amazon has been scrutinized
for its wage practices despite
raising minimum wages
across its workforce.
• While it meets some aspects
of the difference principle by
providing higher wages than
many competitors, ongoing
concerns about working
conditions highlight
challenges in fully realizing
Rawlsian justice within
corporate structures.
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Tesla’s Environmental
Impact
• Tesla promotes sustainable
energy solutions but faces
scrutiny regarding labor
practices at its factories.
• Balancing profit motives
with ethical labor
standards is crucial for
aligning with Rawlsian
justice principles
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Sources
[Link], Jason A., et al. “Justice at the Millennium: A Meta-Analytic
Review of 25 Years of Organizational Justice Research.” Journal of
Applied Psychology, vol. 86, no. 3, 2001, pp. 425-445. (Print)
[Link], Jerald. “Organizational Justice: Yesterday, Today, and
Tomorrow.” Journal of Management, vol. 16, no. 2, 1990, pp. 399-432.
(Print)
[Link], E.A., & Tyler T.R. The Social Psychology of Procedural Justice.
New York: Plenum Press, 1988. (Print)
[Link], Russell & Greenberg J., “Progress in Organizational
Justice: Tying Theory to Practice.” The Handbook of
Industrial/Organizational Psychology, vol. 3rd ed., edited by N.G.
Anderson et al., American Psychological Association Press;
Washington D.C., 2001; pp 165-210 (Print)
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• Thibaut J.W., & Walker L., “Procedural Justice: A
Psychological Analysis.” Hillsdale: Lawrence Erlbaum
Associates; New Jersey; 1975 (Print)
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