Models of Ethical Behavior in Business

In nearly all cases, acting ethically is in a company’s best interest. Ethical business behavior retains talented employees as well as loyal customers. Consumers often feel that by supporting ethically minded companies, they themselves are making ethical choices. Ethical actions can also protect a company from lawsuits and citations following legal violations.

Three Distinct Ethical Frameworks

There are many ethical models used in business. Three primary ethical models in business that have been identified by ethics researchers are:

  • Utilitarianism.
  • Rights and duties.
  • Virtue ethics.

Utilitarianism – Ethical Model Definition

Under the utilitarianism ethical model, a company should make decisions only after considering all possible consequences for those decisions. Utilitarianism is a type of consequentialism, a philosophy that holds that an action’s morality is determined by its consequences. When utilitarianism is applied to a business decision, there are no absolute right or wrong choices. Rather, the right decision is the decision that leads to the most benefit and the least detriment.

An example of resolving a business dilemma through a utilitarian approach is asking whether changing to a paper supplier that uses recycled paper would do more harm to the business than good. The new supplier charges more for paper products, increasing the company’s costs. However, the company would be able to advertise that it supports recycling, which could increase sales. Often, decisions like this require an in-depth look at the company’s finances to work out a proposed action’s actual financial repercussions.

Rights and Duties – Ethical Model Definition

The rights and duties ethical model rests on the concept that individual people and groups have rights and that the company has the duty to respect these rights. For example, when developing a parental leave policy, a company might determine that all new parents have the right to spend a sufficient amount of time with their newborn. The company, recognizing its duty to respect and protect this right, determines an appropriate amount of paid leave time to offer new parents.

Virtue Ethics – Ethical Model Definition

Under this ethical model, business behavior is driven by asking, “What would a virtuous company/person do?” Often, the virtuous company or person in question is not an actual person or company but an ideal that the company strives to emulate. When asking whether a virtuous company would make a certain choice, the individual in charge of the decision is really asking if the choice can reasonably be described with a virtuous adjective like:

  • Kind.
  • Helpful.
  • Responsible.
  • Compassionate.
  • Progressive.
  • Fair.

A manager facing the decision to potentially terminate an employee because of his personal social media posts might apply the virtue ethics model by working out whether terminating the employee is fair, responsible or compassionate. This can be a difficult decision, as firing the employee likely would not be compassionate to him, but it could be the fair, responsible choice for the company as a whole. The manager in this scenario might opt to rely on another ethical framework such as utilitarianism to help her make her final choice.

Using Ethical Models in Business

Companies often lean on sets of ethics and ethical frameworks to drive their business behavior. This is often spurred by a variety of motivations, such as building clout within their industries, retaining talented and skilled employees, connecting with consumers and using their platform to promote values like social justice or environmental sustainability. Once a company has an ethical code in place and an ethical framework for interpreting its ethical code, it can develop its:

  • Code of conduct.
  • Company culture.
  • Strategic partnerships.
  • Business strategies.

Ethics are not usually set in stone. Generally, companies benefit from taking a dynamic approach to applying their ethics and applying ethical models in business. This can mean regularly revisiting their ethical codes to determine where updates are needed and how they can stick to their ethics amid social, technological and industrial changes.

References

About the Author

Lindsay Kramer has been a full-time writer since 2014. In that time, she's experienced the ups, downs and crazy twists life tends to take when you're launching, building and leading a small business. As a small business owner, her favorite aspect about writing in this field is helping other small business owners and aspiring entrepreneurs become more fluent in the terminology and concepts they face in this role. Previously, she's written on entrepreneurship for 99designs and covered business law topics for law firms.