Dilemmas help to illuminate the nature of ethical theories. Contemporary ethical theories provide ultimate principles that can be used to solve a dilemma. If, as in the case of Les Misérables Jean Valjean’s dilemma, which we discussed in Chapter 2, we give priority to what is good for most of the people affected over considerations of fairness, we adopt the stance of theorists called utilitarians. For a utilitarian, the ultimate justifying reason for an action is that the action brings about more good for more people than it does harm. If, on the other hand, we give considerations of fairness priority over the consequences of the action, we adopt the attitude of theorists called deontologists, who believe that actions themselves are ethical in spite of their consequences. For deontologists, the end does not justify the means. Finally, if we consider only what is good for ourselves and give self‐interested concerns priority over what is good for others and what is fair, we adopt the position of theorists called egoists. It may be a bit strange to talk of an “ethical” theory that gives priority to self‐interest, but there are a few defenders of egoism, so we will look at it briefly later. To conclude then, an ethical theory espouses a principle that provides the overriding justifying reason to pursue any course of action.

Both egoism and utilitarianism determine whether an action is ethically acceptable by looking at the action’s consequences. Egoism gives priority to the reason, “It benefits me.” When there is a conflict between something good for me and society, or a conflict between something good for me and its fairness, egoism recommends the self‐serving action. Thus, the egoist theory maintains that an individual should always act in his or her own best interest. As we mentioned, egoism has its advocates, even though it may seem paradoxical for an ethical theory to give primacy to self‐interest.

Utilitarianism gives priority to concern for the good of all, including the individual’s, which is factored into the total overall good. If self‐interest conflicts with the overall good, self‐interest is set aside. Thus, utilitarianism recommends actions that bring about the greatest good for the greatest number of people.

Finally, the theory that gives precedence to the issues of fairness, rights, and commitment, and advocates doing the right thing – no matter what the consequences to self and others – is called deontological theory. Under this theory, the end does not justify the means.

Let us summarize. Sometimes in deciding what to do, no conflict arises between reasons. In these situations, what is good for me is also good for society and is fair and just. In such a case there is every reason to perform the action, which fulfills all three theories’ principles. However, in a case where there is conflict, disagreement arises about which principle to follow. Which reason takes priority? If we decide always for ourselves, we are egoists. If we consider the benefits to society, we are utilitarians. If we are moved by questions of fairness or justice, we are deontologists. The integrity of each of these theories rests on its appeal to a very important reason to choose a course of action.

Ordinarily we use all three sets of reasons. However, these reasons can sometimes conflict, and cause uncertainty about what to do. Because that can happen, skeptics conclude that ethical knowledge is not possible and that ethical beliefs cannot be justified. We contend, however, that only in rare cases of a dilemma are individuals unsure about what to do. In other situations, a systematic investigation can lead to a resolution of the problem. We can determine what to do.

Let us examine each of these contemporary ethical theories more fully.

Egoism

Most people think the principle of egoism – that an individual ought always to act in his or her own self‐interest – is inherently unethical. It appears to advocate selfishness, and in our society, if not in all societies, selfishness is considered wrong. How can a principle that promotes selfishness be an ethical theory? Why would anyone pursue such a faulty theory? What insights support it? Its supporters usually defend egoism by objecting to moralists who emphasize altruism over the pursuit of self‐interest. Egoists assert, as we have noted earlier, that self‐interest is a good thing. Egoism can go too far, however, because always pursuing self‐interest leads to selfishness, and selfishness is immoral.

To understand this more clearly, it is necessary to explain the difference between selfishness and self‐interest. Acting in self‐interest is doing what is in one’s own best interest – what benefits one. Self‐interested pursuits are not bad. Psychologists have pointed out the necessity of self‐love and self‐esteem, and the desirability of an individual’s vigorous pursuit of his or her projects and dreams. It is healthy, therefore, to pursue your own interests. After all, if you don’t, who will? That is why an action that benefits you is a good action, and a good reason for doing something is that it will be good for you.

The problem arises when the pursuit of one’s own interests is at the expense of others. Selfishness is pursuing one’s own interest at the expense of another. If you can make a sale only by persuading a customer who can’t afford the product to buy it, that is selfish behavior. To justify your action by saying that it will help you is to justify it egoistically. Thus, a principle that says, “Always do what is in your own interest,” is a principle that necessarily, at some time or other, promotes selfishness – that is, achieves one’s own interests only at the expense of another. Because selfish behavior is unethical behavior and egoism mandates selfishness, we reject egoism as a viable ethical theory. Clearly, it is not acceptable in the accounting profession, where the code of ethics mandates the accountant’s “obligation to act in a way that will serve the public interest.”

There are additional formal objections to egoism, which we will mention briefly. First, egoism is incompatible with many human activities, such as giving advice. Ask yourself how someone who is always acting in his or her own interest can give you trustworthy advice. The incompatibility of egoism with friendship is also easy to show. Would you consider a friend “true” if you knew that he was acting as a “friend” just for what he could get out of the friendship? We expect friends to put themselves out for us, and we expect to put ourselves out for our friends. The consistent egoist, then, can be seen to recommend against friendship.

Egoism is also incompatible with many business activities, such as being an agent or fiduciary for another. There are times when, as an accountant, you will not have the expertise necessary to provide a client with the best service. In such a situation, you may have to recommend another professional and lose the business. You do not do this because you are concerned about your long‐range self‐interest. You do it because you have a responsibility as a professional to act in the client’s best interest.

A further difficulty with egoism is that it cannot adjudicate disputes, which is one of the tasks of ethics. If we are each to look out for ourselves, how can egoism resolve a conflict in which two of us need the same thing – for example, we each need the last seat available on the next flight to Chicago? To say that both people should look out for their own interests does not resolve the conflict; it gives no practical recommendation.

Moreover, egoism leads to a strange anomaly: it cannot be promulgated – that is, it cannot be published, taught, or even spoken out loud. If, as an egoist, you genuinely believe you should always act in your own interest, what is the effect of conveying that belief to others? It will only alert them to situations in which your interests conflict with theirs, and that is certainly not in your self‐interest. The egoist doctrine recommends not teaching the egoist theory, because doing so is not in one’s own interest. On the contrary, teaching the egoist theory is acting unethically, according to that theory.

A standard philosophical objection to egoism is that it is impossible to formulate in a way that is not either illogical or absurd. For example, if we say, “Everyone should act in his or her own self‐interest,” it recommends an unworkable situation when, as above, two people both need the same thing. If we reformulate the principle to read, “Everyone should act in my own interest,” to whom does “my” refer? If “my” refers to whoever makes the statement, its meaning duplicates the first formulation, which is illogical. If, however, “my” refers to a specific person, it then becomes patently absurd. If Sue says, for example, “Everyone should act in my [Sue’s] interest,” isn’t that ridiculous? Why should everyone in the world, billions of people who do not know Sue, act in her interest? Why should even those who know Sue act in her interest? Perhaps the theory could be restated as “I should always act in my interest.” But if “I” refers to the individual making the pronouncement, it, again, is exactly the same as the first formulation and thus illogical. If “I” doesn’t mean everyone, the statement ceases to be a principle at all, because principles are supposed to be generally applicable.

There is a final objection to egoism. Egoism is based on a distorted egocentric view of the universe. Certainly, I am the most important person in my life. I am inside my own skin, I am always with myself, and I see the world from my eyes and my perspective. Thus, from my point of view, I am the center of the universe. But how limited that view is! The moral point of view demands that I recognize the billions of other people in the world, more or less like me, who all have a subjective viewpoint. Why, then, am I so important? The answer, of course, is that I am not. Thus, the limits of egoism make it an inadequate principle.

If egoism is inadequate, then what is its appeal? The appeal seems to derive from the fact that acting in our own self‐interest is such a strong motivating factor. Philosopher Thomas Hobbes¹ claimed that if we look deeply into human motivation, we can see that all actions are directed by self‐interest. Philosopher and economist Adam Smith² also believed that self‐interest was a primary motivator of human behavior. Consider Holden Caulfield’s observation in J.D. Salinger’s The Catcher in the Rye:

Even if you did go around saving guys’ lives and all, how would you know if you did it because you really wanted to save guys’ lives, or whether you did it because what you really wanted to do was be a terrific lawyer, with everybody slapping you on the back and congratulating you in a court when the god dam trial was over, the reporters and everybody? How would you know you weren’t being a phony? The trouble is, you wouldn’t.³

Salinger’s Holden Caulfield says he does not know if we are acting in our own interest all the time, but there are some philosophers who think that human beings naturally act in their own interest all the time. If everyone always does look out for their own interests then recommendations suggesting any course of action must take that into account. Remember the old maxim, “You’ll catch more flies with honey than vinegar”? If someone is naturally disposed one way you better make recommendations that conform to that disposition rather than go against it.

Such a belief, that everyone always acts in their own interest is called psychological egoism because it is a theory about how people behave, and psychology is the study of human behavior. Psychological egoism is distinguished from ethical egoism in that psychological egoism attempts to describe how we actually behave, whereas ethical egoism prescribes how we ought to behave. If psychological egoism is true, then any moral principle that prescribes that a person act contrary to his or her own interest is sheer nonsense, because it recommends that people do what is psychologically impossible.

Is psychological egoism credible? It would seem not, for there are countless examples of people not acting in their own interest – Mother Teresa, for example, who ministered to the poor, sick, and dying, or the soldier who throws himself on a live grenade to save his comrades. Nevertheless, there is a strong contingent of thinkers who utilize psychological egoism as a model to explain human behavior and from which to make predictions. When economists adopt this theory, the economic and business models they develop assume that everyone is self‐interested. This has to affect their view of what is acceptable or not acceptable. There is a moral maxim “ought implies can”. If you are necessarily always self‐interested you will not be able to act otherwise. If all are self‐interested it is foolhardy to tell people to go against their nature, just as it is foolhardy to expect stones to fly.

According to Adam Smith:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self‐interest. We address ourselves, not to their humanity but to their self‐love, and never talk to them of our own necessities but of their advantages.⁴

Hence, it makes economic sense to appeal to people’s self‐interest.

So to the extent that economists and social scientists assume everyone is self‐interested, they develop economic and business models on that assumption. The self‐interested maximizer is even given a name, homo economicus, economic man. It is in this way, that economics, which looks value neutral, since it assumes everyone always acts in their own interest, attempts to set up systems which will be most productive, systems which, if they are to work, must appeal to the way human beings are. For the economist, that is selfish. No wonder, then, if selfishness is the opposite of ethical, and business is viewed as an activity in our economic system designed around facilitating selfishness, people often claim that business ethics is an oxymoron, a contradiction in terms.

What can be said of this psychological egoism? Without getting too philosophically technical, we need only remind ourselves of the sacrifices that humans make for one another. Even if the psychologists call self‐sacrificing behavior underlyingly selfish, it’s the kind of behavior we want. Thus, even the most hardened economist justifies the appeal to self‐interest by arguing that it will benefit society.

But not all economists are psychological egoists. Many believe that while self‐interest is a strong motivating factor, it is not the only one, but it can be used as an incentive to produce good for society.

One example is Adam Smith, who maintains that the conjunction of the forces of self‐interest, competition, and supply and demand – the doctrine of the “invisible hand” – guide society, by assuring that self‐interest will lead to societal benefits.⁵ Note, however, that Smith is not an extreme psychological egoist, since he does not believe self‐interest is the only motivator:

Howsoever selfish he may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.⁶

But if egoism is inadequate as a theory, what about utilitarianism and deontological theory?

We need to add one thought. The Golden Rule is one of the chief moral guides. It promotes treating others as we would treat ourselves. A religious maxim preaches that we should love our neighbors as ourselves. Both of these maxims implicitly expect us to love ourselves. So it is important to note that self‐interest is a good thing. It is only when it is at the expense of another that it might reduce to selfishness. But if there are times we ought to set our own interests aside, what principles should guide us? Our next two ethical theories can give us tools for deciding.

Utilitarianism

The principal maxim of utilitarianism is best expressed by John Stuart Mill: “Actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness.” Mill continues that “the happiness” to which he refers is “not the agent’s own greatest happiness, but the greatest amount of happiness all together.” The appeal to the happiness of all is Mill’s answer to the egoists.⁷

Utilitarianism has recently been expressed in a slightly different way: “Do that action which will bring about the greatest good for the greatest number of people.” Utilitarianism is significantly different from egoism because the consequences used to judge an action’s worth are not simply the consequences for the agent but also include the consequences for everyone concerned with or affected by the action, including the agent.

We can illustrate the differences as follows:

Good consequences make it a good action; bad make it a bad action.

Utilitarianism is in greater accord with our moral sensibilities than egoism is, and it reflects what we do when we find reasons to justify an action or practice. Doing something to make yourself happy is acceptable unless doing so makes someone else miserable. If you do something that maximizes your own happiness, makes others happy, and leaves precious few people miserable, that action is justifiable.

Let’s look at an example. Suppose an accountant sets up a check‐kiting scheme where he deposits company money in his own account for a few days, thereby gaining interest on the money, before he puts the money in the company account. That action may be in his interest, but it is certainly not in the interests of the greatest number of people. It is unethical because (here is the reason) it clearly harms more people than it helps. Utilitarians praise individuals and companies that provide services or goods for society and cause little harm. They condemn individuals and companies that cause more harm than benefit.

A utilitarian uses the following procedure to justify or condemn an action: Take any action. Compute the benefits and harms of the consequences for everyone affected. If the action brings more total happiness than unhappiness for more people, it is justified. If it causes more total unhappiness for more people, it is wrong. Thus, utilitarianism is the ethical theory that uses a cost‐benefit approach.

There are, however, some difficulties in using the utilitarian approach. It seems obvious that it is wrong for a company to misrepresent its worth to a bank that is considering giving it a loan. Deceiving the bank is wrong. The bank has a right to know the company’s true condition. But suppose the company executive justifies such behavior by saying, “Well, the bank is just too strict, so if I lie to the bank, I’ll get the loan, save the business, and in the end everyone will be better off.” To justify lying, however, by appealing to possible good consequences – even if it is certain that those consequences will follow – points to one of the weaknesses of utilitarianism. It seems at times to let the ends justify the means. Let’s examine some of the other problems that can arise with utilitarian principles.

A further problem with utilitarian theory is the distribution problem. The phrase “the greatest good for the greatest number of people” is ambiguous. Are we obliged to bring about the maximum good, or are we obliged to affect the maximum number of people? Suppose you have five units of pleasure – let’s say five pickles – to distribute to five people. How, according to the formula, should you distribute the pickles? The easiest answer is to give each person one pickle. Then, supposedly, each person will receive one unit of pleasure, and you will have distributed the units to the greatest number of people – five. But imagine that two people passionately love pickles and two people don’t care one way or another about pickles. Wouldn’t it make sense then to give two pickles apiece to the two people who passionately love them? And to give none to the two who don’t care?

1. This can be represented as follows:

   A	=	2 pickles	=	2 units of happiness
   B	=	2 pickles	=	2 units of happiness
   C	=	1 pickle	=	1 unit of happiness
   D	=	0 pickles	=	0 units of happiness
   E	=	0 pickles	=	0 units of happiness
   Totals		3 recipients		5 units of happiness

2. If you distribute the pickles equally (keep in mind that two people don’t like pickles so that receiving one gives zero units of happiness), it looks like this:

   A	=	1 pickle	=	1 unit of happiness
   B	=	1 pickle	=	1 unit of happiness
   C	=	1 pickle	=	1 unit of happiness
   D	=	1 pickle	=	0 units of happiness
   E	=	1 pickle	=	0 units of happiness
   Totals		5 recipients		3 units of happiness

Thus, (B) distributes to the greatest number of people but does not create the greatest amount of happiness, whereas (A) creates the greatest amount of happiness but does not distribute to the greatest number of people. This illustrates the problem of distributive justice: a problem of fairness, a problem of how the goods and the burdens of the world are to be distributed. It is a problem that the utilitarian decision procedures do not manage well, one that seems better handled by deontologists. This problem arises in a utilitarian justification of capitalism – that the economic system of capitalism produces the highest standard of living in the history of mankind. That may be true, but the rejoinder is that in maximizing all those goods, some people get a lot and others get little or nothing. Thus, the critics of capitalism say that although capitalism might create the greatest amount of material goods in history, it doesn’t distribute those goods to the greatest number of people. Utilitarianism leaves us with the question, “How are we to fairly distribute those goods?”

Another problem for utilitarianism is the problem deciding what counts as “the good.” We alluded to this problem earlier in the discussion of the dimensions of human fulfillment, and contrasted the good – what we need – with what we desire. Utilitarian John Stuart Mill and his mentor, Jeremy Bentham, equated “the good” with happiness, and happiness with pleasure.⁸ But there are numerous difficulties with this theory. Let’s examine some of them.

Generally, goods can be divided into two types: intrinsic goods or extrinsic (instrumental) goods. An intrinsic good is something desired or desirable for its own sake. An extrinsic (instrumental) good leads to or is instrumental in obtaining another good. Happiness is clearly an intrinsic good. Money is an extrinsic good. When someone asks why you want money, you can answer, “Because it will make me happy.” Thus, the extrinsic good of money leads to the intrinsic good of happiness. But if someone asks why you want to be happy, there is no further answer.

Mill recognizes happiness as the intrinsic good. Other utilitarians acknowledge other things such as freedom or knowledge as intrinsic goods. Some claim there is a plurality of intrinsic goods. Thus, we have a disagreement about what counts as intrinsic goods. Pluralists believe that there are a number of intrinsic goods; eudaimonists believe that happiness (well‐being) is the only intrinsic good; hedonists believe that happiness is the same as pleasure. Mill, then, was a hedonistic utilitarian. Others, and especially economists, do not identify objective goods but appeal to individual preferences, or “satisficers” – what people prefer or what they think will satisfy them.

Such an identification is problematic, however, because what you prefer is not always good for you, and/or what satisfies you is also not always good for you. Hence, we can ask the utilitarian, “Are you promoting actions that actually are good for people or actions that only seem good for them?” If, as in business and economics, the concept of an objective good is discarded in favor of individual preferences, good can be judged only by demand. But that assumes that what people prefer (want) is what they need (good). That assumption is unwarranted. As we noted earlier, although defenders of capitalism assert that it brought about the highest standard of living in the history of the world, critics declare that a high standard of living is not necessarily a good thing. We might agree, therefore, on where an action leads but disagree on whether that goal is good. Utilitarians, then, along with other ethical theorists, need to determine what things are good, a determination that often provokes ethical disputes, because one person’s good is another person’s poison.

A further problem with utilitarianism is the problem of predicting the future – deciding whether an action is right by looking at its consequences. Predictions, however, can be tenuous, even risky. Thus, the inability to predict accurately creates several problems. Should utilitarians do what they think will bring about good, or should they do what will actually bring about good? And how are they to know? Often, what we think will be good turns out to be bad or has unforeseen consequences. Economists speak of “externalities” – undesirable, unpredicted side effects of some activity.

But the difficulty with utilitarianism that many critics think is the most serious is the problem of illicit means. Many of us were raised with the maxim that the ends do not justify the means. From a utilitarian perspective, however, it is precisely the ends that do justify the means, even if the means are immoral.

The earlier example of misrepresenting assets to the bank illustrates this problem. Even if we justify the misrepresentation by saying that no harm will be done – the company will survive, and the bank will not get hurt – it is still lying. History is replete with examples of actions we consider immoral being performed for the sake of affecting some desirable end. Suppose you could save 100 people by killing three innocent children. Should you do it? The happiness of the 100 people saved would seem to outweigh the pain of losing three children. But our moral sentiments – that taking of the lives of innocent children is immoral – are outraged at the suggestion. Or suppose that you could achieve law and order by convicting an innocent man. Suppose further that the wrongly accused man has already been convicted of several despicable acts; does that change anything? What if an accountant could benefit her company by misstating receivables? Lockheed could retain employees by bribing Japanese government officials? A manufacturer could keep his plant open and 150 people on the payroll by lying to a government inspector? Suppose I can keep a healthy economy in the southern states by preserving slavery? Suppose I can dampen inflation by keeping unemployment artificially high? All of these actions (means) are ordinarily viewed as immoral in spite of the good consequences (ends) they may bring about. Utilitarians who justify an action by citing its good consequences are accused of missing an important part of ethics – that some actions are wrong in principle, no matter what the consequences.

The philosopher W.D. Ross raises one more very important objection to utilitarianism, which he calls its “essential defect”:

The essential defect of utilitarianism is that it ignores, or at least does not do full justice to, the highly personal character of duty. If the only duty is to produce the maximum of good, the question who is to have the good – whether it is myself, or my benefactor, or a person to whom I have made a promise to confer that good on him, or a mere fellow man to whom I stand in no such special relation – should make no difference to my having a duty to produce that good. But we are all in fact sure that it makes a vast difference.⁹

Ross reminds us that we give ethical priority to the duties that arise from special relationships. If lying to the bank is repugnant to you as an accountant, for example, it is because you have a special duty to present companies’ financial pictures accurately. That is what accountants do.

Kant and Deontology

Ross belongs to a group of ethical theorists who maintain that there are ethical concerns with actions themselves that prohibit the actions, in spite of the consequences. These theorists are called deontologists. Deontologist derives from the Greek word “deontos,” meaning “what must be done.” It is sometimes translated as “obligation” or “duty.” The foremost deontologist was the eighteenth‐century philosopher Immanuel Kant.¹⁰

Kant preceded utilitarianists Bentham and Mill, so he did not directly confront their theories. Still, if we apply his principles to utilitarianism, they will show it as a misguided theory because it fails to consider one of the characteristics of a moral action – a moral motive. Kant calls the motive duty. We can describe it as a sense of moral obligation and contrast it to inclination or desire. According to Kant, if you are acting merely from inclination or desire, you are not acting morally at all. Rather, you are behaving the way nonhuman animals behave. For Kant, it is humans’ ability to act on a moral level – to transcend animal instincts and inclinations – that makes us special, makes us moral, and gives us dignity and rights.

How does Kant establish this? Let’s compare a human being’s way of acting with a spider and with a beaver. A spider spins webs. Why? Because of an instinct or inclination. Nature makes spiders that way, and if they don’t spin webs, they won’t live. Beavers chew trees and build dams. Why? Because nature makes them that way. Think how ridiculous it would be to imagine a spider refusing to spin a web or a beaver refusing to chew a tree. They have no choice. They are not free. They are inclined by nature to do those things and consequently will do them.

According to Kant, human beings, too, have inclinations. We are inclined to pursue things we want. We have psychological propensities and inclinations to pursue goals. But we have two capabilities other animals don’t have: (i) the ability to choose between alternate means or ways to achieve the goals to which we are inclined and (ii) the freedom to set aside those goals or inclinations and act out of a higher motive. The first capability makes us somewhat, but not significantly, different from other animals. Beavers have an inclination for food and shelter, yet are equipped by nature with only their instinct to chew bark and build dams to fulfill that inclination. Although we have the same inclination for food and shelter, we do not have the beaver’s limitations. We can choose from a vast array of diverse means – we can hunt, fish, plant crops, build lean‐tos, dig caves, build houses, and so on. We have choices about how to fulfill our inclinations.

The second difference between humans and the rest of the animals, the one Kant thinks is particularly significant, is that humans can act against their inclinations for the sake of duty.

Deontological Ethics

The question “What should I do?” can take two forms. If we are interested in fulfilling our inclinations, the question is qualified: “What should I do if I want to fulfill my inclinations?” At times, however, the question is not what to do to fulfill our inclinations but what to do to fulfill our obligations or duty. Here, the question is unqualified: “What should I do?” There are no ifs, ands, or buts. The answer come out as rules. Kant calls these rules “imperatives.” To Kant, all practical judgments – that is, judgments about what we ought to do – are imperatives. The unqualified “oughts,” Kant calls these “categorical” imperatives. But, as we saw, there are also qualified oughts – oughts determined by some prior inclination – which he calls “hypothetical” imperatives.

When we make decisions based on qualified oughts, what determines the goodness or badness is whether or not the decisions accomplish the goal. For example, if you’re in a third‐floor classroom and you want to get to the cafeteria in the next building, what should you do? You could jump out the window, but you’d probably break a leg, if not more. Such a course of action would be “imprudent,” according to Kant. The “prudent” thing to do would be to take an elevator or walk down the steps.

If we say that we should be ethical in business because it accomplishes what we want, then we are saying it is prudent to be ethical. But that gives us only a hypothetical imperative, which to Kant is not an ethical imperative. Thus, for Kant, if we are being ethical because it’s good business, we don’t have the proper ethical concern. Note that Mill and utilitarians deal with only hypothetical imperatives – if you want the greatest good for the greatest number of people, do “X.” But Mill cannot answer two questions: Why should anyone want the good of others over his or her own good? And what difference does it make what motives anyone has for an action? But, clearly, it does make a difference. If we give to charity for a tax write‐off, that isn’t as fine a motive as giving because alms‐giving is a duty. Unless we are acting out of our duty, then, we are not acting out of moral concern.

According to Kant, therefore, if we’re doing something simply to fulfill a desire, we are not acting out of a moral motive. It follows, then, that if we are doing the right things in business simply because it will improve business, we may not be doing anything wrong, but we are certainly not acting from an ethical motive. To act morally, we do something simply because it is the moral thing to do. It is our duty, a categorical imperative to do “X.” This insight is usually expressed by those who say, “It’s the right thing to do.” But doing “X” because it is our duty is not very informative. What is our duty? Kant presents several formulas for the categorical imperative¹¹ to help us decide. We will look at two of them:

• Act so that you can will the maxim of your action to become a universal law.
• Act so as never to treat another rational being merely as a means.

The First Formula of the Categorical Imperative

The first formula for the categorical imperative, “Act so that you can will the maxim of your action to become a universal law,” needs some explaining. A maxim is your reason for acting. Suppose you borrow money from a friend. When it is time to repay it, you don’t have the cash. You decide not to repay your friend at all because you know he won’t really press you for it and you don’t want to borrow money from a bank. Your reason, then, for not paying him is that it’s inconvenient. Thus, the maxim of your action becomes, “Don’t repay debts (keep promises) if it is inconvenient to do so.”

Now let’s will that maxim to become a universal law – that is, universalize our rule. Promises are made to guarantee that we honor our commitments even when things are tough, when we are not inclined to keep them. What would happen, then, if everybody broke promises because it was inconvenient to keep them? Well, people would end up not trusting each other and society would be chaotic. But that is judging a universal practice by the consequences, and it assumes that chaos is not beneficial. Isn’t that just a more complex utilitarianism, where we judge the universal practice rather than the particular action? Yes, it is. Kant therefore needs to go further, and he does. He recognizes that the consequence of not paying debts or keeping promises is that people will not want to loan money or accept promises. Whether that consequence is favorable or unfavorable, however, is not the determining factor.

The categorical imperative stresses that we must “will” the maxim to become a universal law. For Kant, the will is practical reason, and we cannot will that promises not be kept. This is not because it results in unfavorable consequences, but because it creates a “will‐contradiction.” A will‐contradiction is when you want to eat your cake and still have it. If you universalize promise breaking, no one would trust anyone else, and no one could make a promise to another because a precondition of promise making is trust. To will promise breaking, therefore, you must will promise making. That is the contradiction, and that’s what goes wrong. The same sort of contradiction holds for stealing, lying, cheating, adultery, and any number of other activities we believe are immoral. The only way the action will work is if others do not behave as you do. But that’s a double standard.

The implications for business and accounting are obvious. There must be an atmosphere of trust to allow business to function. If you will to break promises, however, you will other people not to break them; otherwise, promise making will not exist. But to will others not to follow your rule is to make an exception of yourself. When we universalize, therefore, we move beyond our egocentric view. We see that we are the same as others and that this is the basis for the rule of justice: Equals should be treated equally.

The Second Formula of the Categorical Imperative

Kant does not stop with the first formula of the categorical imperative. He moves on to another. Unlike other animals, human beings transcend nature’s inclinations and limitations; humans are free; humans are autonomous. Kant thus calls humans “ends in themselves.” We can determine and self‐regulate our moral life; we can establish values and ends. Consequently, human beings are special, which leads to Kant’s second formula: “Act so as never to treat another rational being merely as a means.”

Under this view, everyone is morally equal and ought to be treated with respect and dignity. Everyone’s rights ought to be respected; no one ought to be used merely as a means or instrument to bring about consequences that benefit the user. This is the deontological answer to the utilitarian’s problem of illicit means. It is not justifiable to use or exploit someone to make society better. Hence, Jean Valjean should not use the vagrant to escape imprisonment. Employers should not exploit employees to further the employers’ own gains. Companies should not mislead customers with false advertising to make sales and boost profits. Corporations should not deceive banks by cooking the books to get a loan.

This formula of the imperative shows what is wrong with slavery and sexism. They dehumanize fellow human beings into instruments to be used by the exploiter. They ignore the fundamental principle that everyone is morally equal and should be treated with respect and dignity. Customers’ and other stakeholders’ rights rest on this principle. Businesses have no right to use stakeholders in the name of profit. They must respect the rights and autonomy of customers, employees, and others to whom they relate. Thus, ethical reasons that rest on concerns for justice, fairness, dignity, and rights are often deontological in inspiration.

As you might expect, though, as with every ethical theory, there are some shortcomings of deontological thinking. The first is the criticism of the utilitarians, who want to know why a person should do his or her duty if it isn’t going to lead to happiness. Why be moral simply to be moral? Utilitarians might wonder: If the end doesn’t justify the means, what does? They surmise that Kant’s deontological position embraces the belief that we ought to be moral because virtue will be rewarded. But if that is so, it reduces deontology to egoism or at least utilitarianism.

Further, there is a problem of what to do when there is a conflict of duties. W.D. Ross, the contemporary deontologist we mentioned earlier, believes that we have certain duties that are prima facie – we should fulfill them unless they conflict. They include duties to keep promises, to do good, and to not do harm, for example. Ross suggests that when prima facie duties conflict, we need to determine an actual duty. But what criterion do we employ? Take an example. Suppose you promised your friend that the next time she was in town you would have a long‐delayed heart‐to‐heart talk. Suppose you also promised your son that you would take him to the ball game on Wednesday. Your friend calls Tuesday night and says she will be in town for a brief time tomorrow, and the time conflicts with the time of the ball game. How do you decide which duty to fulfill? Most likely, you decide by weighing the consequences, and if you keep the promise that causes the least harm, you are using a utilitarian reason to resolve the issue.

Suppose the demands of justice for one person conflict with the demands of liberty for another. In a conflict of rights, utilitarians insist that the only consideration is the consequences of the action. Thus, sooner or later, utilitarians conclude, deontologists have to give priority to considerations of consequences.

One last objection is sometimes raised against Kant’s second formula. What exactly does “merely” mean in, “… no one ought to be used merely as a means or instrument to bring about consequences that benefit the user as a means”? We often use people. For instance, students use teachers; teachers use students. We use someone who buys something from us, if only to help us make some money. But is someone being used merely if the person gives permission to be used? Can an employee be exploited if the employee signs a contract specifying that he or she will perform certain services? The fault is that Kant’s concept of “use” is unspecified. One person’s use is another’s exploitation.

Virtue Ethics

Having examined utilitarian and deontological perspectives, we must now turn our attention to one more approach to ethics. This approach has recently been called the ethics of virtue or character. It addresses the question of what a person should be or become, rather than the question of what a person should do. What type of virtues should a person seek to develop? What makes a good person? What makes a good businessperson? Are these virtues the same or compatible? Is honesty a virtue that businesspeople should develop?

The word virtue comes from the Latin virtus, meaning power or capacity, and virtus was used to translate the Greek word arête, which means excellent. For ancient Greek philosophers, especially Aristotle, the good life (the life of well‐being) was a life in which an individual did things in accord with his or her excellent capacities – “activity in accord with virtue.”¹² Excellent capacities led to well‐being.

Aristotle and his mentor Plato introduced a model for us to follow. A thing should fulfill its potential – should be, so to speak, all that it can be. That potential is to achieve a determinate end or goal or purpose. Just as a knife has a purpose to cut and is a good knife if it cuts well, so a person has purposes, goals, and ends, which are good if the person accomplishes or fulfills them.

Accountants should be truthful in all their professional dealings. They should benefit others. They should avoid harming or exploiting others. They should live up to their responsibilities because they have committed to them. Accountants should behave with integrity. If they accomplish these goals – activities in accord with virtue – they will likely be excellent accountants.

But what happens if personal goals conflict with professional goals? For example, loyalty is viewed as a virtue, but is loyalty compatible with hard‐nosed auditing practices? This chapter has presented some theoretical considerations we can apply to reconcile such conflicts. These considerations give us the ethical approaches that we can use to evaluate various accounting practices.

We can look at ethical theory in two different ways – as providing principles to use in resolving ethical issues, or as presenting the underlying principles that inform our ethical decision‐making processes. Generally, most people do not often deliberate on these underlying principles. Rather, they follow their feelings or intuitions, or they practice the everyday rules they’ve heard all their lives. Ethical principles enable us to analyze and evaluate these feelings and intuitions. But the everyday rules we apply in our decision‐making process are also important – in accounting, for example, professional standards of conduct and the AIPCA code of ethics. Chapter 4 examines these issues.

Discussion Questions

1. What are the major ethical theories?
2. What do theories accomplish?
3. Define ethical egoism and contrast it to psychological egoism.
4. What is the difference between self‐interest and selfishness?
5. What are the two principles of utilitarianism?
6. What different kinds of goods are thought to constitute happiness?
7. What is hedonism?
8. What are the problems with utilitarianism?
9. What is deontology?
10. What are Kant’s two categorical imperatives?
11. What are the difficulties with deontological theory?
12. What is virtue ethics? What question does it ask?

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