The 4 Ethical Rules Applied to Business Decisions

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  • 0:03 An Ethical Role Model
  • 1:45 Utilitarian & Moral…
  • 2:57 Justice & Practical Rules
  • 4:31 Making Ethical…
  • 5:12 Lesson Summary
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Lesson Transcript
Instructor: Leah Feor
In this lesson we will take a closer look at what makes a business decision ethical. We will explore four basic rules that can help us better understand how a decision will ultimately impact stakeholders.

An Ethical Role Model

You pick up the morning paper and see the headline ''Local Baker Finds Success While Serving the Community.'' You read on to discover that the business Breaking Bread has been nominated as Business of the Year in your hometown. It's the busiest bakery in the city, offering up fresh goods baked daily, including a great selection of gluten free and multi-grain breads; but this bakery is doing some other things as a business that are getting attention.

Breaking Bread has tasty goods.

Instead of selling leftovers the following day as discounted, day-old product, they bring all leftover inventory to three local homeless shelters at the end of every day, just in time for dinner hour. In addition to this initiative, they also donate regularly to charity events. At least 50% of the Breaking Bread staff team members are marginalized workers, meaning perhaps they have a disability that limits possibilities for employment elsewhere. By the end of the article, the author writes that there is ''well deserved success for an entrepreneur who has made ethical business decisions that enable her to serve all stakeholders: her customers by day and the community every night.''

What makes an ethical business decision, and how does Breaking Bread fit into this decision-making model? Let's start off by better understanding the foundation of an ethical business decision, meaning a business decision that represents strong morals or a sense of right and wrong. Many textbooks and instructors have different ways to discuss ethics in business. In this lesson, there are four key elements, or rules, which you will learn about:

  • The utilitarian rule
  • The moral rights rule
  • The justice rule
  • The practical rule

Utilitarian & Moral Rights Rules

Let's begin with the utilitarian rule, which refers to an action or a decision that has the largest positive impact on the largest percentage of the community or on active stakeholders, the people who have an interest or concern in a certain area. The objective of following the utilitarian rule is to execute an action or decision that will be good for business, but also have a positive ripple effect to the community at large.

In the Breaking Bread example, this business makes the decision to provide fresh, quality baked goods to customers, donates food to local shelters and charity events, as well as offers employment opportunities for marginalized workers.

The next rule is the moral rights rule, making reference to an action or decision that is made to safeguard or uphold the basic rights of a population. More specifically, this rule relates to how decisions made match with a general moral code of ethics.

Access to food is generally considered a human right, and although food insecurity still exists, Breaking Bread is helping address this concern in the community by providing a source of nutrients daily to those in need. This is a clear demonstration of the moral rights rule and a way that businesses can support moral issues.

Justice & Practical Rules

The third rule is the justice rule, and this rule relates to an action or decision striving for equal positive impact on all persons and stakeholders involved. Although it is not always possible to do good by everyone, this rule suggests the importance of a broad view of equality and fairness for all those affected by the action or decision.

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