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From Aristotle to Rawls: Philosophical Roots of Business Ethics
Business Ethics · Chapter 1: Foundations of Business Ethics and Moral ReasoningSection 1.6 · lesson 6 of 10515 min · free with a free account
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In this lesson
Character, practical wisdom, and fair institutions add two more lenses for business judgment.
- Explain virtue ethics, flourishing, and habituation.
- Apply the doctrine of the mean and practical wisdom.
- Explain the original position, veil, and principles of justice.
- Compare virtue and justice with earlier duty approaches.
- Evaluate feedback, compensation, bonuses, and promotion policies.
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Foundations of Business Ethics and Moral Reasoning
From Aristotle to Rawls
Ethical judgment can examine a leader’s character, as well as the fairness of organizational arrangements. This lesson introduces two perspectives, Aristotle’s virtue ethics and John Rawls’s theory of justice. Virtue ethics asks how people develop character, and exercise judgment in particular circumstances. Justice theory asks how fair principles should govern institutions, opportunity, and the distribution of advantages. You will explain human flourishing, the doctrine of the mean, and practical wisdom. Then examine Rawls’s original position, veil of ignorance, and two principles of justice. Both perspectives connect with earlier discussions of duty, human nature, and consequences, while asking different questions. Performance feedback illustrates character and judgment, while compensation illustrates an adapted fairness analysis. A bonus decision during layoffs lets both approaches examine the same difficult choice. A promotion-policy example then asks how achievement and support for others should be recognized. Explain each conclusion’s foundation, while preserving the application’s facts and limits.
Aristotle: Character and Flourishing
Virtue Develops through Habits and Thoughtful Choices
Aristotle’s Nicomachean Ethics examines the good human life, beyond rules for isolated actions. Eudaimonia means flourishing or living well, through virtuous activity across a complete life. It concerns the quality of living, beyond one pleasant moment or favorable business outcome. A virtue is a stable disposition of character, developed through habituation and informed choices. Honesty develops through honest action, and courage through repeatedly practicing appropriate courageous responses. That development requires more than memorizing rules, or accidentally performing an action that looks admirable. Knowledge, choice, and a settled disposition matter to acting well, within Aristotle’s account. Virtue ethics asks what a person of good character would do, in the actual circumstances. Character informs judgment, while actions and circumstances still matter to the evaluation. The approach emphasizes moral growth, rather than treating each decision as disconnected. Ask how repeated business choices form the kind of leader, colleague, or organization people become.
The Doctrine of the Mean
Find the Appropriate Response, beyond a Fixed Midpoint
The doctrine describes an appropriate response, between excess and deficiency for relevant virtues. The mean is relative to the person and circumstances, rather than a fixed numerical midpoint. Courage lies between cowardice and recklessness, in this example of responding to danger. Cowardice reflects deficient confidence, while recklessness reflects excessive confidence without appropriate attention to danger. The courageous response fits the particular situation, as discerned through practical wisdom. The source diagram places generosity between stinginess and extravagance, showing another contrast. Truthfulness about one’s worth lies between self-deprecation and boastfulness, in its third example. These examples distinguish dispositions, rather than averaging quantities of two bad actions. Aristotle does not claim that every action admits an acceptable mean; inherently wrongful acts such as theft do not. Practical judgment must therefore identify the virtue and its appropriate expression, rather than always compromise. The doctrine guides thoughtful conduct, beyond a formula that removes the need for reasoning.
Practical Wisdom in Business
Tactful Honesty Requires Both Truth and Judgment
Practical wisdom, or phronesis, is the developed capacity to discern appropriate action in concrete circumstances. Consider a manager giving critical performance feedback, where honesty and respectful judgment both matter. Too little directness can produce evasive flattery, leaving the employee without useful understanding. Excessive directness can produce harshness, damaging trust without improving performance in the example. Tactful honesty expresses the appropriate response, communicating the concern truthfully and respectfully. Its expression depends on the employee, situation, and purpose of the conversation, rather than a fixed script. Tact does not mean concealing the problem, or pretending that the performance concern is unimportant. Honesty also does not require needless humiliation, which would mistake harshness for good character. An honest, fair, and courageous manager considers how to make the feedback useful and appropriate. Virtue reasoning asks what the response reveals about character, alongside practical facts. The example connects the mean with judgment, showing why habitual virtue still requires thoughtful action.
Rawls: Fairness of Institutions
Choose Principles without Knowing Your Own Position
John Rawls approaches fairness through institutions, rather than beginning with the individual’s character. In A Theory of Justice, he treats justice as fundamental to social institutions, as truth is to thought. An efficient arrangement needs reform if unjust, despite functioning well in other respects. The original position is a hypothetical setting, where rational parties choose principles of justice. They choose behind a veil of ignorance, without knowing their own social position. The hidden details include social position, wealth, talents, race, sex, and their conception of a good life. These restrictions prevent tailoring principles to known advantages, or bargaining from a privileged position. Rawls argues for fair principles across different positions, under the thought experiment’s conditions. This is a philosophical argument, rather than an empirical prediction that every person always avoids risk. His justice principles primarily address society’s basic structure, including its main political, social, and economic institutions. The company examples adapt this reasoning, beyond treating one business as an entire society.
Two Principles of Justice
Protect Equal Liberties and Justify Economic Inequality
Rawls’s first principle protects an adequate scheme of equal basic liberties, compatible with everyone’s same liberties. Freedom of speech, conscience, and political participation illustrate the liberties identified in the lesson. The second principle places two conditions on economic inequalities, beyond automatically approving unequal rewards. Fair equality of opportunity requires advantaged offices and positions to be genuinely open under fair conditions. Simply declaring access does not answer whether people actually have fair opportunities to reach those positions. The difference principle requires inequalities to work to the greatest benefit of society’s least advantaged members. Increasing total wealth is insufficient, if the arrangement benefits only those already best off. The comparison examines the disadvantaged group’s position, beyond adding everyone’s benefits into one total. Economic benefits do not remove the framework’s concern for equal basic liberties and fair opportunity. Keep the two economic conditions distinct, because genuine opportunity and distribution ask related but different questions. These principles structure justice as fairness, while company applications require explicit interpretation.
Executive Compensation: Hypothetical
A Pay Gap Needs an Argument about the Least Advantaged
Consider a company designing executive compensation, with a gap between executive and entry-level pay. The adapted justice analysis does not declare every pay difference automatically unjust. It asks whether the arrangement genuinely improves the position of disadvantaged workers, compared with alternatives. Relevant improvements include stronger training, higher wages, and advancement paths for lower-paid employees. Those benefits require evidence, rather than a general promise that higher executive pay helps everyone. Explain the mechanism linking the arrangement with the improvement, and examine feasible alternatives. A more equal compensation structure is one possible alternative, rather than the only comparison worth considering. Fair opportunity also matters, including whether disadvantaged employees can genuinely access advantaged positions. Benefits only for executives do not satisfy the source’s adapted test, even if overall company growth increases. The difference principle concerns the greatest benefit available to the least advantaged, beyond any minor improvement. This business illustration borrows that concern, while Rawls’s primary theory evaluates society’s broader institutional structure.
Compare the Foundations
Character and Institutional Fairness Ask Different Questions
Virtue ethics and justice theory ask different questions, while informing the same business decision. Virtue asks what a person of good character would do, in the relevant circumstances. Justice asks what governing principles would be fair, including to those with the fewest advantages. The virtue perspective centers stable dispositions, habits, and the development of judgment over time. The justice perspective centers institutions, rules, and distributions, rather than the individual agent’s character alone. Practical wisdom identifies the appropriate mean, while the original position structures Rawls’s choice of fair principles. These tools differ from the earlier Kantian examination of a maxim, and respect for persons. Natural law instead asks about human goods and flourishing, giving it connections with the virtue discussion. Rawls also protects basic liberties, so justice theory is not unconcerned with rights. The comparison identifies each emphasis, rather than pretending they have separate moral concerns. Explain which question guides your argument, and how its foundation differs from the others.
Compare Practical Use
Each Approach Contributes a Strength and a Difficulty
A strength of virtue ethics is its attention to character, moral growth, and judgment over time. It recognizes that an ethical manager needs developed dispositions, beyond knowing a formal policy. Its typical difficulty is specifying the appropriate mean, especially in an unfamiliar situation. Practical wisdom requires attention to details, rather than mechanically selecting the position between two extremes. Justice theory provides a systematic way to examine fairness, across institutions and policies. It directs attention to opportunity and the least advantaged, beyond efficiency or benefits for powerful groups. Its typical difficulty is applying abstract social principles, to a particular concrete business decision. That application requires identifying the relevant institution, comparison, and affected people, while acknowledging the adaptation. Tactful performance feedback illustrates virtue reasoning, while a compensation arrangement illustrates the justice perspective. Neither approach eliminates facts, or makes conclusions obvious from the framework’s name. Use their strengths to structure explanation, and address the difficulties when defending the recommendation.
Executive Bonuses during Layoffs
Two Frameworks Counsel Caution through Different Routes
Now suppose a firm considers large annual executive bonuses, during a year of entry-level layoffs. The layoffs were intended to cut costs, so employees are already bearing real hardship. Virtue ethics asks whether the bonus decision expresses fairness and temperance, or self-serving excess. A temperate leader considers restraint, rather than treating personal reward as the only relevant concern. The source contrasts total self-denial with self-serving excess, using practical judgment rather than an arbitrary midpoint. It cautions that large bonuses during others’ hardship may reflect greed, but motives and circumstances need examination. The adapted justice question asks whether the arrangement genuinely benefits disadvantaged workers, compared with feasible alternatives. Protecting jobs or funding retraining could be relevant, if the relationship is actually demonstrated. Benefits confined to advantaged executives fail this adapted test, despite possible legal or contractual entitlement. Both frameworks counsel caution in the source example, arriving there through different foundations. Virtue examines character and restraint, while justice examines fair opportunity, distribution, and who actually benefits.
Think About It: Promotion Policies
Evaluate Opportunity alongside Individual Performance
The promotion exercise compares two policies, with different implications for achievement and opportunity. One rewards individual sales performance only, tending to favor employees with more resources and support. The other also recognizes mentoring junior colleagues, which may broaden opportunity while slowing short-term output. Virtue ethics asks how fair, generous, and practically wise leaders recognize achievement and support others. A thoughtful policy need not ignore sales performance, or value helping colleagues only as a sales tactic. It should express appropriate judgment, avoiding self-serving excess and a neglect of legitimate achievement. The adapted justice analysis asks which policy genuinely improves opportunity, and the position of disadvantaged employees. Mentoring can support that aim, if it actually provides useful access, development, and advancement. This is a discussion exercise; policy names alone cannot establish the result. Both perspectives can support recognizing mentorship, when its effects and fair treatment are demonstrated. Defend a conditional answer, using practical details and evidence rather than assuming one label guarantees justice.
Review and Connect
Distinguish Flourishing, Judgment, and Fair Distribution
Eudaimonia means living well through virtuous activity, across a complete life rather than one pleasurable moment. Stable character develops through habituation, supporting consistent thoughtful action instead of isolated apparent goodness. Courage illustrates the mean between cowardice and recklessness, relative to the actual person and danger. Practical wisdom identifies that response, rather than a formula or a fixed quantity of confidence. The veil of ignorance removes knowledge of personal advantages, when parties choose society’s principles. Its purpose is a fair setting for agreement, beyond principles tailored to someone’s known interests. The difference principle requires the greatest benefit to the least advantaged, within Rawls’s justice framework. Fair equality of opportunity adds a separate requirement, concerning genuine access to advantaged positions. For bonuses during layoffs, virtue examines temperance and character, while the adapted justice argument examines distribution. Both can counsel caution, through distinct reasons rather than a single shared mechanical test. Connect character and institutional fairness with earlier frameworks, explaining the foundation behind every ethical conclusion.
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Business Ethics (Business 211) is a self-paced online course of 105 video lessons in 19 chapters, from moral reasoning and compliance to governance, diversity, government and society, social responsibility, consumers, advertising, technology, the environment and global business. It carries a NCCRS credit recommendation for 3 semester credits.
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