Elements of Business Ethics

Instructor: Dr. Jan Garrett

This page was last updated November 2, 2001.


1. Contract Theory, applied to commercial exchange
2. Due Care Theory, applied to commercial exchange
3. Contract Theory, extended to employer-employee relations
4. Due Care Theory, extended to employer-employee relations
5. Responsibility

I. Theories of Fair Exchange--The Original Model

A. Contract theory:

  • applies to conditions of rough equality
  • centers on voluntary nature of deal-making
  • 1. Precontractual duties

    a. Duty to disclose nature of product/service

    b. Duty not to misrepresent nature of product/service

    Statements of seller include factors such as reliability, ease of maintenance, service life, and safety of the product. (More on these below.)

    If a contract is created, then these become promises that morally must be fulfilled.


    c. Duty not to "coerce" -- VIOLATION: "FORCE"

    Party superior in power must limit its ability to compel the other party to act contrary to its wishes.
    (Problem: Is it permissible to consciously persuade the other party to wish and thus to act contrary to its true needs?)

    2. The duty to comply, involving dimensions including

  • reliability: probability that it will operate as buyer has been led to expect it will operate
  • service life: how long will it be useful?
  • maintainability: how easily serviced?
  • safety
    When is a product sufficiently safe?

  • all remaining risks are understood by consumer
  • consumers can judge their probability and severity
  • consumers voluntarily accept them
  • consumers can cope with them
    B. Due care theory:
  • Applies in conditions of significant inequality.

  • Assumes that buyer lacks knowledge and resources of the seller and cannot easily acquire them

    Seller is obliged to meet normal contractual obligations but also look out for the well-being of the buyer--above all, to do no harm to the buyer's interests.

    Primum non nocere: The primary thing is "do no harm"

    Caveat vendor (let the seller take care). Contrast with caveat emptor (let the buyer beware), which corresponds more closely to the Contract Theory

    Due care must be exercised in:

    1. design, testing, and production of the product
    2. informing the user of the risks associated with the product
    3. training, where necessary
    4. research, to improve safety of the product
    The Precautionary Principle extends due care to third parties and to the environment
    Novel technologies are assumed to be harbor risks until careful study shows that they do not.

    The more radical the innovation and the more extensive the proposed application of the novel technology, the more thorough the study required before use.


  • II. Theories Extended to Employer-Employee Relations

    A. Situations of rough equality
    1. on employer's side:
    a. duty to disclose nature of job, on the job risks, chances for promotion, etc.
    b. duty not to misrepresent the above
    c. duty not to take advantage of economic desperation of workers
    d. duty to comply with promises made in employment negotiation
    2. on employee's side:
    a. duty to disclose relevant facts about employee
    b. duty not to misrepresent same
    c. duty not to take advantage of employer's desperate need for services only you can provide
    d. duty to comply with promises made
    B. Situations of significant inequality (employer's advantage)--duty to exercise due care (looking out for employee's interests)
    1. in design of the production process
    2. in the materials used
    3. in scheduling tasks, breaks, rest periods, etc.
    4. in providing income to meet the employee's needs
    5. in training the worker to meet dangers that can occur.

    III. Extended Variants of the Preceding Models

    IV. Responsibility

    A. Key meaning: condition of a being (person) to which (moral) praise or blame can be attributed.

    B. Moral praise/blame is distinguished, say, from technical praise/blame by the fact that moral p/b is measured by moral standards and technical p/b by technical standards.

    C. Excusing conditions--ignorance and inability (to do otherwise)


    Ignorance of principle does not normally excuse unimpaired moral agents: "Ignorance of the law is no excuse."

    Deliberate ignorance ("plausible deniability") does not excuse.

    D. Mitigating circumstances--These do not apply if the person wished a clearly evil act to succeed.
    1. duress--BUT the risk of losing one's promotion or profit margin does not normally count as duress

    2. smallness of the evil produced

    3. uncertainty that an evil will result

    4. smallness of the contribution to a joint act

    E. Joint/corporate actions
    1. definition: an action which requires the intentional cooperation of 2 or more human or corporate actors.

    2. responsibility: we are responsible (at least in part) for the results of corporate acts in which we participate if we anticipated or should have anticipated these results and could have done otherwise.