How Ethical Theories Can Be Applied to Business

The ethical business decision making theories of Aristotle, Kant, and JS Mills can aid in framing complex business decisions. From Aristotle’s virtuous “Golden Mean” theory to Kant’s “Categorical Imperative” to JS Mill’s utilitarianism approach, these three ethical decision-making models, virtuous, deontological, and utilitarian, can be used to analyze challenging business decisions.

Ethical business decision making can result in building consumer trust and loyalty. Conversely, when unethical decisions are made, it can result in consumer alienation and business losses. The recent engine emissions cheating scandal at VW is a textbook example of the consequences of poor ethical decision making.

From the perspective of Aristotle’s virtuous “Golden Mean,” it is imperative the decision maker self-reflect on who they want to be and make good decisions. A business leader to apply the virtuous decision-making model would have to simply focus on their character and to be aware of what kind of person they want to be in the context of their community. When framing this against a business, it would be what sort of culture is desired within that business.

When applying Kant’s “Categorical Imperative,” or deontological theory, the action (or duty) taken is of the highest priority. When applied to business decision making, this can be interpreted as doing what is right in the pursuit of business success. When making Kantian decisions, the leader must understand that their actions are the only thing that is important, as long as those actions are right. Those actions are broken down to be described as a duty, or the necessity to take the right action. The right action can be determined by treating people as the invaluable asset with no exceptions.

JS Mill’s theory of Utilitarianism through the “Principle of Utility” is most easily described as being focused on the consequence. The utilitarian decision-making process can be simplified by performing a cost/benefit analysis to make the decision that performs the greatest good. The utilitarian model focuses on the overall consequence of a decision. In the utilitarian model, if the ends justify the means, the decision should be pursued. This can be summarized by evaluating the consequences of a decision to impact the greatest number with the greatest good.

The leadership at VW during the diesel emissions scandal can be identified to have a breakdown on all three of the described ethical decision-making models. However, this scandal can be dissected most easily using Immanuel Kant’s theory of deontological ethics. There are many red flags in the leadership decision making processes from the Executive Leadership to the Engineer that allowed their fleet of diesel vehicles to be purposefully designed to defraud not only regulators, but their very own customers. What makes this even worse is VW defrauded their customers on purpose. The implemented design was a purposeful design decision made and approved by leadership. Kant’s ethical reasoning is built upon the idea that people are beyond all price and that one’s behavior must be universal; there can be no exceptions. VW failed to uphold both of these core requirements.

When VW was unable to produce an engine platform that met rigorous emissions standards while simultaneously providing high engine efficiency standards, they made exceptions and wrongly treated their customers (people) as things. This decision to defraud VW’s customers is in opposition to the Kantian principal to act with respect for all people and to treat people as ends, not means. In their duties, the leaders also failed to universalize their behavior and decisions. Their decisions were not acceptable to everyone and required exception. VW’s lapse in ethical decision-making highlights the negative business impact that can result if Kant’s deontological theory isn’t followed.

The three ethical models discussed can be applied to a myriad of business decisions. It is important to weight difficult decisions against the ethical thing to do. Choosing poorly can have dire consequences. In the example regarding VW, the company was able to weather the storm, but another company may not be as fortunate.