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5

Consequentialism and non-consequentialism

Andrew Gustafson

Business persons tend to focus on results, or consequences, so business practice is naturally consequence-driven. To engage in commerce is to act with a vision of an end to be achieved—for example, to create valuable goods and services, to make a profit, or to attain the firm’s goals for the quarter. In the academic field of business ethics, few would claim to be consequentialists, and, in fact, most find consequentialism in tension with ethics not a source of it, in part because consequentialism is often associated with a focus on either happiness or utility—oftentimes economic—rather than ethical values. Given the perceived association between consequentialism and economic utility, as well as the apparent links between business and specific results, many come to the view that business practice itself is often inherently in tension with ethics.

Traditionally, the consequentialist asserts that the rightness or wrongness of an action, rule, or policy is entirely dependent upon its consequences, or results. Truth telling is right, a consequentialist might say, because lying ultimately leads to bad results. Utilitarianism is a standard consequentialist ethic, holding that actions are right if they have the greatest probability of bringing about the greatest happiness for the greatest number. The non-consequentialist, in contrast, is one who thinks that the rightness or wrongness of an action (rule, policy) is not determined by its consequences but by some feature inherent to the action itself. Telling the truth is good in itself, not merely because it brings good results (although that may be an added benefit). We do not determine morality by an action’s benefit to us or others; its rightness or wrongness is found in something other than consequences. Typically, duty-based, law-based, or rights-based theories are considered non-consequentialist.

We can find elements of consequentialist and non-consequentialist thinking in business itself. Of course business is about results, and in many cases one is praised for good results and chastised for bad ones—one’s good intentions are not so important, particularly if one has poor results. On the other hand, it is not uncommon to hear business people say that they chose such and such an action that cut into profits “because it was simply the right thing to do.”

It will be useful to explain more clearly consequentialist and non-consequentialist theories of ethics, and then highlight some of the key examples of how they have been applied in the field of business ethics. To that end, the first section below furnishes a brief overview. Section two provides explanations of both consequentialist and non-consequentialist ethical theories. In the third section each of these types of theories are applied to business ethics. The concluding remarks raise some questions about non-consequentialism, as well as some contemporary developments in business ethics theory.

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A brief overview of ethical theories

In terms of the history of modern ethical theory, one could say that consequentialism has been the preeminent approach, starting from Jeremy Bentham’s theory of utility and that of J.S. Mill, to Henry Sidgwick’s utilitarianism in the 1800s and up until 1971 with John Rawls’ critique of utilitarianism in A Theory of Justice. Since Rawls’ work, much of English-speaking ethical theory has been a reaction to consequentialism; in fact, non-consequentialist Kantian ethics have been revived after Rawls (Wood 2007). Some might place the revival of non-consequentialist virtue theory at the feet of Elizabeth Anscombe who launched a critique of modern ethical theory in “Modern Moral Philosophy” (1958), but others might point to Alisdair MacIntyre’s After Virtue (1981). Regardless of how one construes that history of theory, there is no doubt that non-consequentialist theories have quite certainly dominated academic business ethics literature since the 1970s. Consequentialism is rarely used as a basis of business ethics, and this is perhaps because business decision-making “without ethics” is typically construed as a utilitarian calculus with an aim of wealth maximization for the firm.

There are many possible varieties of consequentialism. We may disagree about which ends should be achieved or expected or whose consequences should be considered, but typically the two key consequentialist ethics are utilitarianism and egoism. Traditionally, utilitarianism considers the probability of benefit to all people, but egoism considers only the individual. In addition, there are variations that suggest that the universe of concern might be one’s firm. Bentham, Mill or Sidgwick are classic utilitarians: the best thing to do is whatever brings about the greatest happiness for the many. Ayn Rand was an egoist who argued that each person ought to do whatever is in his or her own rational interest. The main difference then, between utilitarianism and egoism concerns whose happiness is the basis of moral intention: that of the agent alone or that of the larger society? The egoist is concerned only with the consequences to himself, not others, while the utilitarian is concerned with the consequences to the many (either as a whole, or as a sum total of the individuals).

A further distinction to be made between different types of consequentialism turns on a distinction between an action and a rule (governing actions). Are we to judge each individual act by the measure of how it contributes toward the greatest happiness principle? Or should we use the greatest happiness principle to determine general rules that are then to be applied to determine our actions? Such rules, by the way, would be empirically derived from looking at consequences of types of acts as they have occurred throughout history and over the long-term, such as “don’t lie” or “don’t steal.” The first type is act-consequentialism, and the second is rule-consequentialism (the rules being empirically derived from what typically happens when, for example, one lies).

Non-consequentialist theories of ethics find the basis of ethics in some sort of rules not based on consequences. The basis of the rules may be some intrinsic Good (Plato 1974 [fourth century bce]) or some fundamental rights (Rawls 1971); or these rules may be entailed by the commands of reason (Immanuel Kant 2012 [1785]), or derived from natural law (Thomas Aquinas 2000 [thirteenth century ce]), self-evident intuitions (W.D. Ross 1965) or the emergent results of universal sentiments (Francis Hutcheson 2003 [1728]); for others, such rules may be the commands of God (Duns Scotus 1986 [thirteenth century ce]).

The intuitive appeal of non-consequentialism is that happy consequences and ethical behavior do not, in fact, seem to be necessarily connected. Doing the right thing often is difficult, and one pays a price for genuinely ethical conduct. There are principles or behaviors that appear to be valued in themselves, not because of any resultant outcomes. For example, we may think it right to keep promises even when it will cost us; we demand fair and costly trials for criminals even when it seems obvious they are guilty; and we seek to preserve the rights of individuals or minorities when it will cost the majority a great deal. Situations such as these illustrate the non-consequentialist intuition that consequences are not a good guide to determine the ethical course of action.

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On the other hand, the intuitive appeal of consequentialism is that we do typically think that the results count: we provide rights to minorities because such rights make for a happier society overall; we keep promises because lying usually ends up with trouble. Look what happens to the boy who cries wolf too many times when there is no wolf: when the wolf actually shows up and he cries “wolf!” then no one believes him. In discussions about public policies, social values, right ways of living, and correct actions we constantly support our viewpoint by turning to the consequences as reasons: “ethical business is good (i.e., profitable) business!”; “honesty is the best policy.” When faced with a difficult decision we often judge what to do based on what will cause the least harm, or the most happiness—this is how we conduct ourselves with others and reason ethically on a regular basis.

Ethical theories of non-consequentialism and consequentialism

Non-consequentialism

As mentioned above, there are many types of non-consequentialism. Some are oriented around rules, others around rights. Deontologists believe there are certain principles or rules that must be obeyed. The deontologist believes he can give reasons to justify the rule, and provide a means to discover the rules as well, by reason in most cases (Kant 2012), although at times other empirical or intuitive means enable us to discover the basic principles that must be followed. Some think these principles are inviolable, while others such as W.D. Ross (1965) think rules can be overridden at times by other rules.

Kantian non-consequentialism

Kant, and contemporary Kantian ethicists such as Christine Korsgaard (1996) or Allen Wood (2007), see the duty to follow rules as fundamental to one’s ethics. For Immanuel Kant, the only intrinsically good thing (good in itself) is a good will. Good intentions are not only more important than consequences, it is the intention that carries moral significance. We praise the one who tries to do good, often even if the person does not achieve it; yet someone who attempts to harm but accidentally produces a good result receives no praise (perhaps even condemnation). Kant’s categorical imperative states that at all times, in every case, one has an ethical obligation as a reasonable being to act only in accord with principles that are universalizable: One is rationally obligated not to do what one could not wish everyone to do, and to do that which one can rationally expect everyone to do without contradiction.

His second formulation, which he believes follows from the first, is that we should treat persons only as ends, not merely as means to our own ends—people must be treated with dignity and respect as individuals. In Kant’s ethics we find a deep concern for the individual and her freedom and sociality. This latter notion of sociality is quite important, for Kant also argues that we should see each other as a member of a kingdom of ends, and when I act I should think not merely of myself, but of every person I meet as an end in himself, and all others should conceive of everyone else the same way.

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There are criticisms of Kant’s ethics—that it is too rigid, that rules can conflict, that emotions are neglected, and even that it slips into consequentialism. But the beauty of Kant’s theory is that it seems to capture the importance of the dignity of the individual person while also seeing us all as responsible for one another in society. And it attempts to do this purely on the basis of rationality, not empirical consequences. Insofar as we judge people on their intentions more than we do on what they accomplish, Kant has captured a very important aspect of morality.

Contractarian non-consequentialism

Social contract theorists are also typically considered non-consequentialists. They typically believe that moral principles or rules are achieved by agreement or consensus, and that rationality compels us to make these agreements and stick to them. In other words, reason directs us to those rules that are ultimately in the self-interest of each person in the covenant. Thomas Hobbes was a classic contractarian, while Rawls (1971) and David Gauthier (1986) are more contemporary. One can think of social contract theory in this way: an egoist is concerned primarily about himself—he believes that the right way to act is to act in the way that generates the most good for himself alone; however, the problem he faces in getting all that he wants is, quite simply, you, me, and all other people. Due to the presence of others, he is forced to negotiate and get the best that he can—by negotiating he arrives at a social contract that ensures rights for all social actors participating. Each person gives up some potential power in order to receive some guaranteed rights in society. These rights provide moral norms regarding how we should treat one another.

Although there are criticisms of social contract theory—for example, its starting point assumes a fictional hypothetical situation with a decision-maker who is sexless, raceless, and essentially disembodied of personal attributes—but it does provide a framework for thinking about the shared foundations of ethical obligations.

Virtue ethics non-consequentialism

Virtue theorists, it is often said, are outside of the consequentialism/non-consequentialism discussion because they are concerned with the development of ethical character, or the development of personal virtues, not acts per se. Consequentialists and non-consequentialists, in contrast, are portrayed as focused on acts. However, since virtue ethics is teleological, implying thereby an end or a goal to be pursued, some have categorized it as consequentialistic. For Aristotle, happiness is the end in itself: it is not pursued for some other end, but it is achieved when humans fulfill their proper function, which is to be rational (and so free) beings. We pursue rationality and virtue because it will ultimately bring us happiness. But there are also reasons to see virtue ethics as fundamentally non-consequentialist. After all, the virtuous person should possess certain dispositions and character traits; he is not required to achieve a particular state of affairs. So a courageous individual who does a heroic act may face the bad consequence of death even as the person manifests the virtue of courage. For traditional virtue ethicists the world is constructed in a certain fashion, with rules of nature not unlike the “laws” of physics or biology that provide a blueprint of correct or excellent behavior. Nature’s determination makes particular actions or ways of being in the world right or proper, and others wrong or improper—in other words, unnatural, unhealthy, or inappropriate to the one doing those actions. Dishonesty is wrong not merely because of the consequences of lying, but because it goes against the created order of nature and the world as it was intended (by nature in Aristotle’s case, or by God in Aquinas’ case).

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Criticisms of virtue ethics are various. Some contend that virtues are culturally-relative, others that virtues do not provide clear rules or guides to action, and others suggest that the appeal to personal excellence is ultimately self-centered. Nonetheless, virtue ethics has enjoyed a powerful revival in the last few decades.

Consequentialism

Consequentialist approaches to ethics judge the right or good by the consequences. There are at least two key initial concerns: what is the consequence desired? and for whom? Or, put another way, what is the value theory we have (is it happiness, pleasure, preference satisfaction, profit, or efficiency?), and who is within the universe of concern for which we are deciding (myself, my family, the firm, the club, society at large?).

Egoism

The egoist claims that the individual is the locus of concern. There are three types of egoism to distinguish: psychological egoism, rational egoism, and ethical egoism. Psychological egoism is not a normative (ethical) theory, but a descriptive claim that all people are motivated only by their perceived self interest. Although Hobbes is often considered a social contract theorist, at root he was a psychological egoist: “No man giveth but with intention of good to himself; because gift is voluntary; and of all voluntary acts the object to every man is his own pleasure” (Hobbes 1994 [1651]: Ch. 15, par. 16). Ethical egoism is the view that we ought to act on our own self interest. Ayn Rand set forth a version of ethical egoism that emphasized an individual’s rational long-term self-interest. In the title of one of her books (The Virtue of Selfishness: A New Concept of Egoism 1964), Rand sought to indicate her own brand of egoism, according to which the individual should “exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself” (Rand 1964: 3). Although Rand and ethical egoism is often caricatured as something brutish, scholars such as Douglas Rasmussen and Douglas Den Uyl, as well as Tara Smith, have provided more careful analyses of her thought (Rasmussen and Uyl 1987; Smith 2006).

Utilitarianism: Jeremy Bentham

When defining utilitarianism, it is useful to consider Jeremy Bentham and John Stuart Mill. Mill’s definition of utilitarianism is quite clear:

The creed which accepts as the foundation of morals, Utility, or the Greatest Happiness Principle, holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain; by unhappiness, pain, and the privation of pleasure.

(Mill 1998 [1861]: Utilitarianism, Ch. 2)

Bentham puts no restrictions on what should or shouldn’t bring pleasure; since it is purely subjective what one may find pleasurable, one man may like to write poetry, another to bet on horses. Bentham developed a utilitarian calculus, a numerical tool to calculate the pleasures and pains of particular acts. His goal was to quantify pleasure cumulatively: we calculate the relative pleasure and pain of all people involved to determine which action or policy would most likely yield the most happiness, and then we legislate accordingly, always keeping the greater happiness of the majority in mind.¹ In some cases a particular choice may cause more pain to me than to others (for example, the government destroys my house in order to build a highway), but we realize that, given the great pleasure others will receive, it is the right thing to do, despite my personal loss.

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Given Bentham’s approach, critics say that utilitarianism undermines justice, runs roughshod over the minority, and ignores individual rights, treating individuals as a means to the greater happiness rather than ends in themselves. Some have urged that the doctrine is too demanding, because in most cases in which one enjoys some idle hour or amusement, one could be bringing about more pleasure for the many. Moreover, the motivation to act in utilitarian fashion remains a problem: why would I sacrifice my own pleasure in order to bring pleasure to the many? Finally, critics point to the great difficulty utilitarians face in providing an adequate means of determining how to do the utilitarian calculus.

Utilitarianism: John Stuart Mill

Knowing these criticisms of Bentham’s utilitarianism helps us understand how John Stuart Mill’s utilitarianism differs from that of his predecessor. Mill contended that some types of happiness are qualitatively superior to others, and some capacities for happiness are more important to preserve than others. Higher pleasures include those of the intellect and imagination, as well as noble feelings and benevolent sentiments. When asked how to determine which are higher and which lower, Mill says we must ask those who are experienced with both types. Mill suggests Epicurus (d. 270 bc) as a model hedonist, since Epicurus saw friendship, fidelity, and generosity, for example, as essential to a truly happy life.

Mill sees impartiality (more recently referred to as “agent neutrality”) as essential if one is to be capable of sacrificing what one loves most for a higher good. In this vein, Mill regards Jesus Christ as an exemplar of such selflessness. Ethical action (as well as rules and principles) arise from what brings about the best interests of humanity:

Not only does all strengthening of social ties, and all healthy growth of society, give to each individual a stronger personal interest in practically consulting the welfare of others; it also leads him to identify his feelings more and more with their good, or at least with an even greater degree of practical consideration for it. He comes, as though instinctively, to be conscious of himself as a being who of course pays regard to others. The good of others becomes to him a thing naturally and necessarily to be attended to, like any of the physical conditions of our existence.

(Mill 1998 [1651]: 3.10.32)

Some critics tend to portray all utilitarians as act-utilitarians—as though each action is uniquely calculated—but many utilitarians claim that we must establish rules, based on the greater happiness principle. Both Mill and Bentham were in favor of creating legislative rules based on human experience of what actions tend to bring about happiness (or less unhappiness) for the many. Mill’s distinction between higher and lower pleasures, in conjunction with what many scholars view as his implicit version of rule-utilitarianism, suggests a better way to respond to typical criticisms (Miller 2011). Mill believes justice is valuable to society, and a society committed to preserve justice and various classic individual rights (including those of property, assembly, and religious freedom, among others) will encourage the capacity to aspire and attain the higher forms of happiness. In addition, we glean from experience and from history that lying generally is not the right policy, so we should avoid it, as a rule.

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With regard to motivation, Mill’s answer—like that of Aristotle, Plato, and ethicists throughout history—is that we must work hard to train the young and instill in them social concern and values, all for the sake of the greater happiness of society. There is no doubt that doing any utilitarian calculation, at least with any precision, is difficult; however, the allusion to mathematical precision may be misleading and unnecessary. As Aristotle says, “We must not expect more precision than the subject-matter admits” (Nichomachean Ethics I. 3).

So utilitarianism is not without difficulties, but also not without defenders. It can provide rules for action based upon a goal of achieving the greatest happiness for the many. Those rules may include supporting individual rights, justice, truth-telling, kindness, respect, and many other types of behavior that throughout history have helped to establish greater happiness for the many.

Non-consequentialism and consequentialism in business ethics

Business tends in its activity and goals to be focused on results—and while these results can include the interest or satisfaction we find in our business activities, a basic consequence typically sought is profit. In this sense then, business has a consequential value as its goal. For many academic business ethicists, this is a utilitarianism of business values—a myopic concern with profit, at the expense of human concern for others. So consequentialism is often seen as a non-starter for business ethics theories, for it will either be egoistic, and concerned only with self, or it will be utilitarian and so only concerned with profit. But this is an unfair portrayal of utilitarian ethics, and a myopic misleading view of consequentialist ethics.

In the business ethics literature there is surprisingly little literature written from a consequentialist perspective, although there is a great deal of literature that criticizes it. Non-consequential theories such as Kantian deontological theory, contractarianism, and virtue theory dominate the scholarly considerations of business ethics. The reasons for this have much to do with a general rejection of any sort of consequentialism. Although business may be conceived as a collective egoism whose collectivity is demarcated by the boundaries of the firm, egoism is typically associated with selfishness and greed—in other words, egoism is typically seen to be anti-ethical—exactly what ethics is trying to resist. The utilitarian concern with happiness is often considered to be at base hedonistic—or merely concerned with self-indulgent pleasure—and thus in conflict with ethics. Even though John Stuart Mill’s utilitarianism focuses on a rich and diverse conception of the greater happiness of the many, for many in business (and for some scholars in business ethics), utilitarianism is often associated with a narrow economic utilitarianism that is reduced, by many critics, to a mere concern for profit maximization complemented with an ethical indifference to others.

Non-consequentialism in business ethics

Non-consequentialism is clearly the predominant ethical outlook in academic business ethics, at least since the 1970s when the field first emerged, right after the so-called “normative turn” that followed Rawls’ critique of utilitarianism. Norman Bowie developed a Kantian approach to business ethics (Bowie 1999), and his influence continues through his students (Arnold and Harris 2012). Thomas Donaldson and Thomas Dunfee (1999) developed the contractarian approach, rooted in Hobbes, Jean-Jacques Rousseau and Rawls, and more recently scholars such as Nien-hê Hsieh (2004) have developed a Rawlsian approach. Robert Solomon (1993), Edwin Hartman (2015) and many others have developed virtue ethics approaches to business ethics.

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The Kantian approach in business ethics

Norm Bowie is clearly the pioneer in this field, and his students have gone on to help establish Kantian business ethics as the predominant approach among many business ethicists. Bowie claims that a Kantian practicing businessman should adhere to promises and contracts, refrain from deceit or fraud, and conduct himself in a way that he could will to be standard practice. In addition, when it comes to the treatment of others, Bowie says a Kantian approach will give great autonomy to employees, and great respect to customers and suppliers, in line with treating all people as an end, not merely as a means (in this case, a means to profit). One should pay fair wages, pay bills briskly, give respectful and timely customer service, and do all of this for the sake of duty, not merely for repeat business or reputation. Furthermore, Bowie applies Kant’s notion of a kingdom of ends to the corporation: “Because an organization is a community of persons, whatever else an organization is, it should be a moral community” (Bowie 1999: 89). This has significant implications for how a business should be run. As he says, “A Kantian would morally object to a hierarchical structure that requires those lower down to carry out the orders of those above, more or less without question” (Bowie 1999: 12). Additionally, Bowie suggests that all companies use open-book management, where the employees all have access to all accounting documents of the company (Bowie 1999: 54).

Bowie provides a list of characteristics of a company run with a Kantian approach:

(Bowie 1999: 90)

But there are criticisms to be raised with Bowie’s approach. The difficulty with considering the interest of all affected stakeholders (1) is that it seems to be a nearly impossible responsibility to have to consider the ways one’s decision affects even the most remote stakeholders every time one makes a business decision. And the more stakeholders one considers, the more difficult the decision would be—buying from one supplier may adversely affect the supplier’s competitors, all of whom employ human beings who are indirect stakeholders in this purchasing decision (Langtry 1994). The difficulty of having all affected by the firm’s rules participate in their determination is that this would make corporate governance extremely time consuming and inefficient. A problem with claim (6) is that Bowie slips from talking about all individuals as parts of a kingdom of ends to making the company, which is itself a kingdom of ends, into an agent in the kingdom of ends. Sometimes he talks about corporations having “a duty of beneficence to society in return” (Bowie 2008: 11). On other occasions he describes the firm as a kingdom of ends (Bowie 1999: 87). Perhaps the company has limited duties, rights, and is a person as a legal fiction. But surely Bowie does not think a corporation as an entity possesses the same sort of dignity or responsibility as a human—we would not mourn the death of company as we would a human.

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Bowie himself thinks the greatest challenge to a Kantian approach is that it is too demanding, particularly when it comes to purity of motive, but a more practical concern is simply how to take account of or judge someone else’s intentions (Bowie 2017). For Kant, we judge one’s behavior to be ethical not on the basis of achieving some goal, but on the basis of what one was intending. A good intention or good will is the only purely good thing for Kant. But this is not particularly congruent with business. Business behavior is generally judged from an external perspective—John will get a raise if he meets his sales goals, not if he had purity of heart in desiring to meet those goals. Part of the reason businesses judge based on performance, not purity of intention, is that they have no means to access the inner workings of one’s heart. They can, however, see what the results are. If one uses external behaviors for judging performance, then this is a fundamental problem for Kantianism in general, and Bowie’s Kantian business ethics in particular. And it is quite difficult to see how one could do anything to judge others for merit or demerit apart from simply taking their word on what their intentions were in a given case. In this sense, Bowie and Kantian ethics seem to have a subjectivity problem—only the subject acting can possibly know what his intentions are, and so only he will be able to determine if his actions are morally praiseworthy or blameworthy.

Bowie illustrates his Kantian non-consequentialism with some examples from commerce (Bowie 1999). However, these seem to rely on consequentialist arguments. In the first of three examples, Bowie describes how he observed bad checks posted on a wall at a restaurant; that restaurant, he points out, no longer accepts any checks. In another example, drawn from Poland, he relates how he learned of a bank failure caused by many people taking out loans and not paying them back. Finally, he reports the testimony of economists who claim that Hong Kong will not remain a central worldwide hub of finance unless China supports Hong Kong’s longstanding tradition of strictly upholding the laws. From these examples, Bowie argues, “If a maxim for an action when universalized is self-defeating, then the contemplated action is not ethical. That is Kant’s conceptual point. And when enough people behave immorally in that sense, certain business practices like the use of checks or credit become impossible” (Bowie 1999: 20). However, each of these examples seems to point out a conditional consequent that we want (to write checks, receive loans, conduct business in Hong Kong), and then argues in reverse that if we seek to maintain these desirable goods, then we shouldn’t engage in certain actions (writing bad checks, reneging on loans, or disregarding the tradition of law in Hong Kong). This exemplifies consequentialist reasoning: we shouldn’t write bad checks because we enjoy the option of writing checks, and so on. Bowie, like Kant, wants the ethical principles to be based in reason, and kept formal, but his illustrative argument seems to slip into the reality of the empirical and to employ tacitly a consequentialist mode of reasoning. (For a defense of Kant against consequentialist readings, see Kirstein 2005: 139–55, as well as the discussion in Timmermann 2007: 161–3 and 2014).

A social contract approach to business ethics

Donaldson and Dunfee’s Ties that Bind (1999) is the classic contractarian approach to business ethics. Donaldson and Dunfee hold that while ethical attitudes and cultural expectations may develop and change over time, there are transcultural concepts that do not. For example, what is considered to be irresponsible polluting may shift or adjust according to the culture, but certain macro-concepts, such as the dignity of all persons, remain constant and serve, thereby, as stable boundaries (or “hypernorms”) for the micro-concepts of a culture (Donaldson and Dunfee 1999). Because societies do have these macro-concepts or hypernorms, contractualism then attempts to acknowledge the importance of shifting values and expectations, while not slipping into mere cultural relativism. The hypernorms for society (and thus business) can be “discerned” according to Donaldson and Dunfee, by observing whether particular characteristics feature in some norm. Such features might include widespread consensus, support by industry, NGOs, government groups, consistency with the laws of many countries, and so forth (Donaldson 1999).

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Non-contractarians generally find a few things problematic about social contract theory. First, it is doubly hypothetical—a hypothetical conclusion of a hypothetical meeting of all involved. All involved did not get together, and no decision was actually made, but through thoughtful reason (if not conjecture) the parties come up with binding rules for morality. One is reminded of Ronald Dworkin’s famous objection to social contract theory that a doubly hypothetical agreement cannot bind any actual person (Dworkin 1975: 18). Feminists like Alison Jaggar claim that the hyper-idealization of the hypothetical actors in the hypothetical agreement discounts the concrete differences among people, and particularly ignores those special concerns of the disenfranchised (Jaggar 1989: 91). Amartya Sen has argued that social contract theory spends far too much time imagining what an ideal world should look like, and has very little concrete advice to alleviate the social ills of the actual world (Sen 2009: 53).

But these criticisms are in some ways misplaced. For one thing there is a concern for the disenfranchised in the work of Rawls, and especially in the work of Nien-hê Hsieh (2004), among others. And Donaldson has done careful work trying to show that universal trans-cultural values might be distinguished from mere cultural ones—and his distinction between conflicts of development and conflicts of tradition is helpful (Donaldson 1996). More often than not the arguments rest on some suggested basic principles, rooted in supposedly shared intuitions about how we want the world to be, or what seems right to us.

Certainly the social contract approach has done a great deal to help businesses consider the notion of social responsibility. Although that notion remains popular, there are many who find it to be a category mistake: companies, these critics say, are not the sorts of beings that can have “social responsibility”—only people can have social responsibilities (see, for example, Friedman 1970). In addition, utilitarians will see in social contract arguments appeals to outcomes that seem thoroughly concerned with the greater happiness of the many—in other words, social contract arguments can be seen as a species of utilitarianism that takes individual rights as basic to the happiness-producing capacity of a society in general.

The virtue approach in business ethics

Robert Solomon (1993) and many others have worked to develop this approach, which has generally followed the more general revival of virtue theory in philosophy. Solomon’s book Ethics and Excellence (1993), as well as his more popular A Better Way to Think About Business (1999), were landmark books for virtue ethics business ethicists. Virtue ethicists such as Solomon usually rely on the Greek philosopher Aristotle. In short, their view is that business, as a part of our social lives, is about more than money—one must think of one’s practices in business as an essential part of living the good life. A flourishing or excellent life will bring fulfillment and deep satisfaction. But an excellent life is not simply making the most money possible, and in business we must remember this as well, according to the virtue ethicists. As Solomon puts it, “Business is about integrity as well as profits, and the profits mean little if their cost sacrifices integrity . . . Business serves people and not the other way around, and it is value and virtue that make business life rewarding and meaningful” (Solomon 1999: xiii).

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Virtue ethics is a powerful theory of personal moral development. It does not allow us to bifurcate our personal and business values, but regards virtuous business practices as an essential aspect of a flourishing life. Recent work applying virtue ethics to business include the historical and broadly interdisciplinary account of Deirdre McCloskey (2006), as well as Alejo José Sison’s Happiness and Virtue Ethics in Business: The Ultimate Value Proposition (2014), in which he suggests ways for businesses to cultivate the virtues of their employees, and argues that pursuing virtue will bring about the greatest business value. A typical criticism of virtue ethics is that it is difficult to see how to apply it practically in the business world but Edwin Hartman’s Virtue in Business: Conversations with Aristotle (2015) does an admirable job of applying virtue ethics to business practice in concrete ways. Both Sison and Hartman’s works also interact with the field of moral psychology, which is essential.

Consequentialism in business ethics (utilitarianism)

Academically, utilitarianism is the leading consequentialist ethical theory, yet in the business ethics literature utilitarianism almost always plays the role of foil—the appropriate object of criticism and response.² There are few contemporary business ethicists who show any interest in supporting a utilitarian business ethics.³ This is perhaps because there are indeed so many economists who promote what is often called a utilitarian calculus by which business should make choices according to what will bring about the greatest social utility, as determined in purely economic terms. This economic utilitarianism is often cast by stakeholder business ethicists in an unfavorable light in relationship to business ethics: market utilitarianism is seen to be in favor of “policies that deregulate private industry, protect property rights, allow for free exchanges, and encourage competition” and on this economic utilitarian view “Efficiency is simply another word for maximizing happiness” (DesJardin 2013: 35).

Clearly at a popular level “utilitarian” has come to mean something like “concerned not with aesthetic or other such values, but with least-expensive effectiveness” as in “we chose our car based on utilitarian reasons—it’s no Lexus, but it was inexpensive and it gets us from point A to point B.” However, there is much more to utilitarianism than efficiency, or, even more crudely, financial efficiency, although some of the criticisms of utilitarianism in the business ethics literature fail to see this.

But how does utilitarianism apply to business? What kind of ethical direction can a mandate to seek pleasure and avoid pain provide to business practice? We know that a fundamental principle of Mill’s utilitarianism is that we contribute to the greater happiness and to sustaining a happiness-producing society. We should do this impartially, not giving special concern to ourselves, but considering all with equal weight when making a judgment. Even our discussions of justice and what rights one should be granted are based on concerns for utility, or the greater happiness—which is why Mill wrote the classic work On Liberty, arguing that a society that protects individual liberty against the tyranny of the masses will actually provide the greatest possibility of happiness

We see this already in our laws. We take drivers’ licenses away from people who get too many speeding tickets, because their speeding is considered a danger to society. We take away people’s freedom and put them in jail when they commit crimes that pose a great threat to society. We give people citizenship in our country when they demonstrate some concern and respect for others in the country, and some willingness to contribute to the general happiness of society by paying taxes, being good citizens, etc. We grant people freedom to vote, own land, have guns, trade stocks, run companies, and all sorts of freedoms so long as they do not use these freedoms against the greater happiness of society. In the United States, the Sarbanes-Oxley legislation (2002) specifically provides for the possibility that the Securities and Exchange Commission (SEC) can bar unfit executives and limit pay, among other legal provisos. The fundamental argument for this power to take away freedom is that the greater happiness of society is being protected. Other acts of legislation, across a variety of nations, are undertaken with an appeal to the public welfare or the greater happiness.

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If one wants to develop a utilitarian business ethics approach, it seems that the best candidate would be a rule-utilitarianism that acknowledges qualitative distinctions of pleasure and upholds principles of justice, fairness, and liberty. Such an approach can not only bring about an environment more capable of enabling happiness (than a market or society that does not uphold justice, fairness and liberty), and it has the advantages of helping determine the right rules of conduct and of providing reasons that are broadly compelling to our basic desire for good overall outcomes.

With respect to business practices, the utilitarian approach can be adopted at three different levels: a) the individual level, guiding personal business practices towards others; b) the corporate level, giving direction to company policies that affect the greater happiness of those inside the company; and c) the macro level, considering the effect of the company on the greater happiness of society. A utilitarianism properly understood could be quite adept at providing ethical support and guidance for many aspects of business practices at the individual, corporate, and macro levels. Adopting the utilitarian approach at each of these levels, one can then grasp how utilitarianism might provide a basis by which to address the following questions or concerns.

Concluding remarks

We have examined the typical consequentialist and non-consequentialist ethical theories, addressed some criticisms and responses, and considered the ways that consequentialism and non-consequentialism, typically construed, have been utilized in business ethics. In his great work, On Liberty John Stuart Mill wrote that it is essential to constantly be challenged with atypical positions because, if that new stance is right, then one has a chance to exchange error for truth; if the atypical view is wrong, there will be a “clearer perception and livelier impression of truth, produced by its collision with error” (Mill 2002: 75). With this in mind, I have two concluding comments. I suggest, first, that many if not all views of non-consequentialism can be ultimately reduced to consequentialism. We can call this viewpoint reductive consequentialism. Second, I highlight some recent work of the market failures approach of Joseph Heath as a type of consequentialism that I believe to be crypto-utilitarian as well.

Recently Philip Pettit has argued for “the inescapability of consequentialism” (Pettit 2012); he is not the only one to think that most ethical theories in the end depend on consequentialism (Sosa 1993; Portmore 2009; Dreier 2011). Consequentialists actually have a long history of regarding non-consequentialism as not possible, or, perhaps more positively, of thinking that even though non-consequentialists believe they are not consequentialists, they in fact are. (Of course this is not accepted by most Kantians, see, for example, Timmerman 2014.) Mill actually claimed Kant was a consequentialist who didn’t realize it, because ultimately in Mill’s eyes, “All he [Kant] shows is that the consequences of their universal adoption would be such as no one would choose to incur.” (Mill 1998: 1.4.32). On Mill’s reading, Kant turns out to be a rule-utilitarian, because universalizing “bad” maxims, more often than not, results in consequences we would not desire, not consequences that are, in some sense, contradictory or impossible.

Although contractarians like Rawls reject aspects of utilitarianism, ultimately they are concerned about consequences. Hobbes argues for the Leviathan due to its efficacy. And contractarians from Rawls to Scanlon (1998) have since argued for or against various political structures or rules based on what the consequences of those structures or rules would be. If it is true that contractualism is a form of forced-negotiation egoism, by which one must compromise and try to get the best deal possible through a social contract, then contractualism certainly seems to be a consequentialist ethic.

Virtue ethics can be conceived as a consequentialist ethic, insofar as it is teleological. In Aristotle we find little concern for society except insofar as it is important for me to fulfill my own potential as a social being. Self-sacrifice is not promoted, except insofar as it will gain one honor in a noble death. Quite clearly virtue ethics for Aristotle has a consequence or aim—happiness—in the broad sense of that word. Aristotle’s deep understanding of the relation between behavior and habit influenced Mill, and it is no surprise that the author who cited Christian and Stoic authors, as well as Epicurus (1998: 2.4. 1–20), had read the works of Aristotle long before he read the works of Bentham. Mill’s utilitarianism brought a broader and deeper conception of social happiness into the utilitarian calculus, thanks, in no small part, to Aristotle.

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Second, an interesting recent example of a consequentialist approach to business ethics is Joseph Heath’s market failures approach (Heath 2013, 2014). He attempts to derive ethical rules or limits for business practice from the pursuit of a healthy market efficiency itself, rather than to impose it from everyday morality, which may not always usefully apply to business. Market efficiency and the avoidance of market failures are fundamental: to profit from market failures is “morally objectionable, not because it violates some duty of loyalty to the customer (as stakeholder theory would have it), but because it undermines the social benefits that justify the profit orientation in first place” (Heath 2014: 88–89). The market-failures approach urges businesspersons to maintain a healthy market, not to exploit or corrupt it. Specifically, in addition to obeying laws enacted to protect the general good of society, individuals and companies need to follow ethical imperatives such as these: to minimize negative externalities; to reduce information asymmetries; and, among other imperatives, to refrain from opposing appropriate regulation aimed at correcting market imperfections, and to shun the imposition of protectionist measures or the establishment of barriers to market competition. In short, Heath says, “If all companies fully internalized all costs, and charged consumers the full price that the production of their goods imposed upon society, I believe it would be impossible to make the case for any further ‘social responsibility’ with respect to the environment” (Heath 2014: 90).

Heath obviously has a consequence in mind that guides his theory of business practice, namely, Pareto-optimal markets. It is hard to pin down what the underlying justification is for the market-failures approach other than that it will lead to Pareto-optimal markets in theory, which would provide more balanced outcomes for everyone—specifically, a state of affairs in which resources are allocated in such a way that it is impossible to make any one better off without making another worse off. It appears that the market failure approach is crypto-utilitarian, if the reason for pursuit of Pareto-optimality is that it is in the end best for the overall market (the many).

Non-consequentialists are convinced that there must be transcendent truths such as rules, principles or rights that can be established and maintained without reference to consequences. Consequentialists believe that such rules, principles and rights can be grounded only on the basis of consequences. It is a wonderful world we live in where we find so many different approaches trying to discover the excellent, good and right ways to practice business. For some, responsibility, duty, and reason are the basis of business ethics. For others rights, justice, and social responsibility are the essentials. The virtue ethicists believe excellence, virtue, and flourishing provide the best tools for thinking about business. And the utilitarians believe the pursuit of the greatest happiness for the many is the most cogent and best means to conceive of ethical business. Although there are clearly distinctions between these varieties, they all have in common a pursuit of ethical business practices.

Essential readings

The essential readings in consequentialism and non-consequentialism include the classic texts of John Stuart Mill, Utilitarianism (1998 [1861]), and Immanuel Kant (2012 [1785]), Groundwork of the Metaphysics of Morals. For contemporary discussion, see J.J.C. Smart and Bernard Williams, Utilitarianism: For and Against (1973); Samuel Scheffler, Consequentialism and Its Critics (1988); and Julia Driver, Consequentialism (2012). For applications to business ethics, one may consult Jeffery Smith (ed.) Normative Theory and Business Ethics (2008); Dennis Arnold and Jarred Harris (eds) Kantian Business Ethics (2012); and Andrew Gustafson, “In Defense of a Utilitarian Business Ethic” (2013).

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For further reading in this volume on utilitarian thinkers and their conceptions of business, see Chapter 2, Theorists and philosophers on business ethics. On common sense moral intuitions, moral awareness, and moral blindness, see Chapter 4, Teaching business ethics. On the relation of moral theories and management theories, see Chapter 26, Theoretical issues in management ethics. On economic analysis and its implications for corporate conduct (including the “market failures” approach to business ethics), see Chapter 17, The contribution of economics to business ethics.

Notes

1    Bentham’s earliest writings emphasize this majoritarian element. In his essay of 1774, “A Comment on the Commentaries and A Fragment on Government,” he defines utilitarianism as a “fundamental axiom, it is the greatest happiness of the greatest number that is the measure of right and wrong” (Bentham 1977 [1774]: 393). For more on the importance of happiness for the greatest number in Bentham see J.H. Burns 2005.

2    In the recent book Normative Theory and Business Ethics (Smith 2008) utilitarianism did not even merit an essay, although it was criticized in many of the papers included.

3    Exceptions would be Thomas Jones and Will Felps (2013), William Shaw (1999), the current author (2013), and other “stealth utilitarians” who at times advocate utilitarianism (see Boatright 2006).

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