Theoretical and Practical Components of Business

Teleology, Utilitarianism, and Justice in the Frameworks of Business Ethics

The study of theoretical and practical components of business activity involves not only the analysis of exact numbers and mathematical formulas but also the research of the people’s principles of thinking and decision making. After all, human beings and their interactions are the core and origin of all business processes. According to Mackey and Sisodia, capitalism “…has afforded billions of us the opportunity to join in the great enterprise of earning our sustenance and finding meaning by creating value for each other”.¹

And it is the philosophy and its various movements that are most applicable to substantiate the ethical principles of commercial activity. The purpose of this work is to examine the principles of business ethics from the perspective of the concepts of teleology, utilitarianism, and justice using examples.

Teleology as an Ethical Perspective and the Importance of the Goal in Business

It is no secret that the primary goal of any business activity and the main motivator for making certain decisions is profit or getting the desired product. This is why teleology as a philosophical discipline is suitable as a way to explain commercial activity’s ethics. It is possible to note that “a teleology is an account of a given thing’s purpose”.² For example, a request was received from external stakeholders for the cheapest sneakers.

Therefore, the goal of producing these sneakers is to satisfy customer demand and maximize profits. But the lowest prices generate low costs as well as low quality. CEO of Nike finds suitable production conditions and negotiates with Indonesian manufacturers. From a teleological perspective, where “a purpose is imposed by human use,” all business ethics are fully respected.³ However, according to Nisen, as it turned out later, the low cost of production was due to child labor, low salaries, and poor working conditions.⁴ As a result, Nike owners took several measures to improve and comply with labor standards so as not to incur monetary and reputation losses. These positive business decisions are explained from a utilitarian perspective.

Utilitarianism or the Idea of Good for All in Business Ethics

Utilitarianism as a branch of consequentialism is a result of the development of the teleological school of philosophy. According to Mill, the idea of utilitarianism “…holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness”.⁵ A similar principle is present in the theory of capitalism, discussed by Mackey and Sisodia, where it is indicated that the ethical foundation should be empathy and care for other people.⁶

The terrible working conditions in Indonesian factories have proven to be wrong by creating unhappiness among workers and the troubled western public. Such a reaction in the form of protests against Nike caused unhappiness among owners and shareholders, which led to the introduction of Western labor standards and constant inspections and open reporting. The subsequent normalization of the working environment, customer sentiment, and profit indicators promoted happiness among both external and internal stakeholders’ groups.

Principles of Justice and Business Ethics

The principles of justice are most relevant for such type of business organization as a cooperative society. According to Rawls, “this way of regarding the principles of justice I shall call justice as fairness”.⁷ It is important to note that fairness is also a cornerstone of stakeholder theory.⁸ Stakeholders’ fairness rests on the foundation of obligation, through which equal and fair distribution of benefits, protection, services, and burdens. An obligation implies a kind of voluntary act between the obligor and the creditor in the course of which the corresponding relations between the participants are formed in the form of rights.

Each cooperative community during the course of the obligation generates a unique set of moral and legal rights; therefore, the correctness of actions should be evaluated within the framework of the organization. This principle of justice of rights in philosophical movements is called “deontology.” For example, the most significant contributors should be the most protected, and individuals with the most considerable influence or rights in the society should be subject to the highest responsibilities. Researchers note that the presence of inequality leads to a weakening of the business and possible conflicts within the team.⁹

Practical or, in other words, “pragmatic” evidence of the harm of inequality testifies to the importance of equality of opportunity to achieve the common good. However, equality should not imply the same result for all participants in the organization; profit should correspond to the efforts made by the stakeholder.

Conclusion

This work discussed the ethical aspect of the business from the point of view of teleology, the neighboring discipline of utilitarianism, and the principle of justice. Although the teleological and utilitarian perspectives are parts of the same philosophical trend, nevertheless, they disagree on issues of achieving the goal. Roughly speaking, teleology supports the famous phrase “the end justifies the means,” which may mean harm to humans.

Utilitarianism, on the other hand, puts happiness at the forefront of both the result and the process. These statements have been demonstrated by Nike’s business operations in Southeast Asia. The concept of fairness is laid in principle of justice, which in business manifests itself in the form of obligation, the application of which ensures an equal distribution of rights and profits.

Bibliography

Mackey, John, and Rajendra Sisodia. Conscious Capitalism, with a New Preface by the Authors: Liberating the Heroic Spirit of Business. Boston: Harvard Business Review Press, 2013.

Mill, John Stuart. Utilitarianism. London: Parker, Son, and Bloum, 1861.

Nisen, Max. 2013. “How Nike Solved Its Sweatshop Problem.” Business Insider. Web.

Phillips, Robert. Stakeholder Theory & Organizational Ethics. San Francisco: Berrett-Koehler Publishers, 2012.

Rawls, John. A Theory of Justice. Oxford: Belknap Press: An Imprint of Harvard University Press, 1971.

Schawbel, Dan. 2017. “Unilever’s Paul Polman: Why Today’s Leaders Need to Commit to a Purpose.” Forbes. Web.

“Teleology.” Basicknowledge101.com. Web.

Footnotes

1. John Mackey and Rajendra Sisodia, Conscious Capitalism, with a new preface by the Authors: Liberating the Heroic Spirit of Business, (Boston: Harvard Business Review Press, 2013), 11.
2. Teleology, (Basicknowledge101.com), 1.
3. Teleology, 1.
4. Max Nisen, “How Nike Solved Its Sweatshop Problem,” (Business Insider, 2020), para 5.
5. John Stuart Mill, Utilitarianism, (London: Parker, Son, and Bloum, 1861), 9-10.
6. John Mackey and Rajendra Sisodia, Conscious Capitalism, 16.
7. John Rawls, A Theory of Justice, (Oxford: Belknap Press, Imprint of Harvard University Press, 1971), 207.
8. Robert Phillips, Stakeholder Theory & Organizational Ethics, (San Francisco: Berrett-Koehler Publishers, 2012), 94.
9. Dan Schawbel, “Unilever’s Paul Polman: Why Today’s Leaders Need to Commit to a Purpose,” (Forbes, 2017), para. 5.