Ethical Decision Making 2: Forms of Justice

Society and Morality

  • Every society seeks to address the same problems of how, how to allocate scarce resources to provide goods and services, how to insure people have sufficient means of exchange to procure them, how to insure that they have access to them and then to do so in a way that is just and fair.
  • The choices we make about to do these things have moral implication-so our economic systems are not amoral as some suggest.

Economics, Scarcity and Justice.

  • When people find themselves competing for scarce resources the issue of distribution and the just and fair way to distribute these harms and benefits becomes the focus of the economic system and currently the dominant concept is that of the free market or capitalism.
  • However the concepts of “economic or distributive justice” rest on more than just one paradigm.


  • Ferrell, Fraedrich and Ferrell (2015) define justice as the fair treatment and due reward in accordance with ethical or legal standards including the disposition to deal with perceived injustices of other.
  • DeGeorge (2010) states that in its most general formulations justice consists giving each person his or her due, treating equals equally and unequals unequally.
  • McDonald (2015) advances that justice affirms what is morally ours and it drawn from many sources such as the law, rational thought and an intuitive sense of fairness and equity.

Theories of Justice

Theories of justice have been developed to provide general guidance on what type of justice is required in a particular set of circumstances or situations. They demonstrate or describe the how to distribute burdens and benefits for particular situations and circumstances.

The formal principle of justice claims that equals ought to be treated equally and unequals treated unequally.

This is why laws are introduced to protect the disadvantaged in society or to ensure individuals are not unfairly discriminated against due to a particular characteristic such as race, ethnicity or the presence of an disability, that whilst it affects the individual, may not have any impact on their ability to undertake a job or function.

Libertarian Justice

  • At the heat of libertarianism is the notion of non-interference and secondly the right to property that has been justly acquired.
  • It does not matter that some can acquire more than others, provided that they acquired it justly.
  • Libertarians believe in freedom of choice and the absence of interference in these systems
  • We can see economies that emphasise the free market, that minimise taxation and have small welfare systems and few “government businesses” as predominantly libertarian.

Egalitarian Justice

  • Rawls believes that there ae no traits or characteristics that make one person more deserving than any other. As such there are no differences between people that warrant the inequitable distribution of benefits and burdens- everyone should have an equal share.
  • Egalitarians advocate the need to introduce systems that seek to temper the imbalances directly- thus redistribution of wealth through taxation, welfare systems, increasing access to health and education funded by society through taxation etc.
  • Such societies are often referred to as mixed economies because they do exactly what libertarians argue against- interference.

Marxist Justice

Marxism advances the importance of society justice and that capitalism and the libertarian paradigm on which it rests should be rejected because of the inequalities that it generates

Marxism argues that allowing the accumulation of private wealth creates inequity which perpetuates the problem allowing the rich to get richer and the poor poorer. This economic inequality then leads to inequalities of liberty and power with the wealthy able to gain even greater control and thus even more wealth.

According to Marxism these problems can be solved by restricting the ownership of capital and property to the collective society- the government and by systematically planning the economy to deliver goods and services that are in need rather than what may be wanted.

Economics and Morality

We often approach economics as a game between multiple competitors and suppliers and consumers all within the confines of the market.

Hence it is often claimed that economics is amoral.

However as DeGeorge (2010) identifies this is a misnomer as economics is all about people and how they interact-people’s lives are affected by the way in which goods and services are made available and by the rules by which these exchanges occur.

As such questions of fairness, justice and the benefits and harms that are derived must also be addressed.

Following the collapse of the former Soviet Union in the 1990s, the Capitalism has become the dominant economic system throughout the world.

However to say that all forms of capitalism are the same is incorrect.

Scandinavia and the US both have market based systems, but the levels of Government intervention, taxation and welfare differ markedly.

There are three distinguishing features that differentiate capitalism form other systems

An available accumulation of industrial capital

Private ownership system of the means of production

A free market system

Capitalism and Morality

Many moral questions arise from the concept of the free market

  • The equilibrium price is determined by the interaction of demand and supply – but based on perfect knowledge, many buyers and sellers and non-interference
  • Is this realistic?
  • Does imperfect knowledge, market advantage favour some at the expense of others?

By definition the competitive market results in winners and losers, advantages and disadvantages.

How these are determined and distributed again raises question related to fairness and justice

Capitalism and Morality

The Invisible Hand Concept

Many of the moral questions that can be raised about capitalism and the free market are countered with the concept of the “invisible hand.”

Smith argued that self-interest on the part of individuals actually promotes the good of society, more so than when people consciously try to do good for society.

According to the invisible hand theory, each of us, acting in our own self-interests, generates a demand for goods and services that compels others to deliver those goods and services in the most efficient manner so that they may be able to receive compensation from others and make a profit in doing so.

In this process, resources are allocated in the most efficient manner, in contrast to a process that relies on a centrally planned system.

Free Market Movement

  • The success of the market relies on a reciprocal economic relationship.
  • A characteristic of capitalism is that people offer their services as part of the production process and that in return they receive wages which then can be used to purchase the gods and services that are produced by the economy.
  • Without money people cannot buy goods and services.
  • However investment is free to travel to those parts of the market where returns will be higher- the free movement of capital. This includes markets outside of national boundaries.
  • Can labour also move just as freely?

Social Contract – Licence to Operate

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

McDonald (2015) states that social contract theory proposes that an implied contract exists between a business and the state in which it operates regarding, rights, responsibilities and expectation of behaviour.

The implied social contract, sometimes also called a licence to operate, is that the state allows a corporation to form and operate and pursue a profit, only if it does so ethically, obeying laws and increasing the social welfare of that society

The benefits to society are increase in welfare through the availability of goods and services and by compensation for employment.

This would seem to suggest that a condition or expectation of social contract is that organisations are expected to employ people of that society.

Economically this is necessary for the market to operate- or is it? Does a corporation have a moral duty to meet its social obligation?

What is Society?

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

Rawls (1971) describes society as a ‘cooperative venture for mutual advantage’.

Carroll and Buchholtz (2015) define a society as a community, nation or a broad grouping of people with a common traditions, values, institutions and collective interests and activities.

Rawls (1971) advances the shared concept of justice as a mechanism for binding individuals since ‘among individuals with disparate aims and purposes, a shared conception of justice establishes the bonds of civic friendship; the general desire for justice limits the pursuit of other ends.

Social Contract

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

The social contract concept is used to explain the relationship between society and business (Shocker and Sethi, 1973).

Mathews (1993, p. 26) explains the idea of social contract as follows: “Society (as a collection of individuals) provides corporations with their legal standing and attributes and the authority to own and use natural resources and to hire employees. Organisations draw on community resources and output both goods and services and waste products to the general environment. The corporation has no inherent rights to these benefits, and in order to allow their existence, society would expect the benefits to exceed the costs to society”.

Social Contract – Rawls

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

The concept of social contract as described by Rawls (1971) suggests that organisations have implicit economic and social obligations to a society or nation when they are granted permission to establish an organisation or corporation.

Rawls offers general conceptions of justice linked to social contract; one being that social and economic inequalities are to be arranged so that they are to the greatest benefit of the least advantaged and are attached to offices and positions open to all under conditions of fair equality of opportunity (Sterba, 1990).

The Licence to Operate

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

The “licence or social licence to operate” is described as a community’s perception of the acceptability of a company and its operations (Thompson & Boutilier 2011).

Post et al., (2002) and Elkington, (1997) provide a more general interpretation suggesting that that organisations use strategic decision making to achieve a reduction of harms and create benefits to society so that it’s continued operation is acceptable to all parties involved.

Both Prakash Sethi (1974) and Carroll (2002) maintain that an organisation’s basic social responsibilities are economic and legal, usually described as acting within the law and to provide goods and services to a society that provides a return on investment to shareholders and stakeholders.

Social Contract and Obligation

Adapted from Kohlberg’s Ethical Decision Making Model – Practical Business Ethics, French and Granose, Prentice Hall 1995

If social contract and licence to operate are a forms of rights conferred on an organisation by a society then the question must be what are the obligations or duties of a firm to that society with regards the legal and economic reciprocity?

Is a firm obliged to be socially responsible by contract and or licence?

Types of Justice

If we are to hold individuals and organisations accountable and award moral praise and moral blame, we must also address the issue of justice and how we make decision about what is fair just and reasonable.

  • Buchholz, (1989, p. 36) describes three types of justice; distributive, compensatory and retributive, that can be used to describe the actions that are generated or rights that are deprived of an individual or an organization by a society for a wrong doing.
  • Ferrell, Fraedrich and Ferrell (2015) provide a slightly different interpretation describing procedural and interactional justice in addition to distributive.

Distributive justice

This form of justice is concerned with a fair distribution of society’s benefits and burdens.

  • It addresses the goods and services a society has available, through the major institutions of government and business and how these should be distributed.
  • Many governments pass laws that are directed at redistributing forms of benefits to individuals that for particular reasons are excluded or deprived of the benefit.
  • Many social welfare programs can be seen as such a form of justice- as is taxation whose purpose is primarily redistributive.


Compensatory justice

This form of justice is concerned with finding a way of compensating one for what they have incurred a loss or when wronged by others.

In the court system, individuals and organisations may be fined for breaking laws or contracts and ordered to pay recompense for the “injury” sustained to another party as a result of their actions.

This could be described as the compensation owed to an individuals when their rights have been infringed or not met.

Typically compensatory justice tends to be financial.

The problem is the subjectivity involved in assessing the value of the compensation against the injustice purport rated on the individual- real or artificial

Retributive Justice

This form of justice is concerned with the imposition of punishments and penalties such as the removal of rights or the ability to participate in a society, upon those who do wrong.

Examples include prison sentences, banning of people holding drivers licence for drink driving offences, disqualification of people holding political or corporate offices.

Again a contentious issue is the extent of the retribution – the length of the sentence or ban. Precedent- the legal concept of making a judgment which s similar to a previous judgment for a similar offence provides a degree of consistency.


Procedural Justice

  • Ferrell, Fraedrich and Ferrell (2015) identify this form of justice is concerned with the processes and activities that result in outcomes or consequences.
  • It addresses the methods by which decisions are made and reached.
  • It essentially advances that a just approach will emphasise the consistency of the decision making process, that it is open and participative involving those affected.
  • They describe the organizational context and organizational decision making as the basis for procedural justice.

Interactional Justice

  • This form of justice is based on relationships and the treatment of others but within the organisational context.
  • Ferrell, Fraedrich and Ferrell (2015) refer to concepts such as accuracy of information, respect for others and truthfulness between employers and employees.