The Formalism Theory of Business Ethics
Formalist ethical theory is one based around rules. Normally, these approaches define the rules as things coordinated with human nature---exemplifying it in some fashion. One errs ethically, in other words, by violating what it means to be human. Applying this ethical foundation to business means to lay out general principles of ethical behavior that are then applied to individual cases.
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The Basic Approach
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The different types of formalism focus primarily on the intention of human action, not the results. Probably the most famous formalist is Immanuel Kant. Writing at the end of the 18th century, Kant held that the only good will was the universal one. Universal in this case means that will which is unencumbered by any specific material or personal interest. If the person, the agent, wills that which is attached to no specific interest, it wills the will in general. This is the common way of expressing the fact that the will is totally free only when it wills universal laws, laws that apply to everyone equally. If I will, for example, that cheating in business is fine, I will a contradiction, since universal cheating in business would being the system crashing down, because no trust would exist. It is a contradiction because I am willing that I be the exception to the universal will. I can cheat---no one else can.
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Business Ethics
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This well-known formalist approach has the advantage of being applicable to many different circumstances. A manager can will the following: "I will treat my workers like cattle." The contradiction here is that the manager himself would never will that she be treated in such a way, but is making an exception for herself. Her will is polluted by self-interest, one that harms the way any business should be run. In other words, her maxim could never be a universal law, since it would destroy the loyalty and efficiency of labor.
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Consequences
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In business, the bottom line is central. Formalist ethics largely dispenses with this. The bottom line is a consequence, and hence has no ethical value. How one makes a profit is far more important than the profit itself. Another example is international investment. A manager in the Congo might will that workers receive just enough to keep them alive. This can never be universalized because American workers would never tolerate such a circumstance. One is making an exception based on the global division of labor and power politics, not the formal ethical norm of universality. Again---the manager is making a decision based on contingency, not universality.
Labor
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One of the more important applications of formalist ethics in business is labor, treatment and remuneration. The board of directors can will as a group: "We will pay all laborers, whatever their rank, precisely what they are worth relative to their production." This is a maxim that can be universal, since the economy would thrive if people were paid what they were worth, and precisely what they are worth. Exploitation in all its forms would cease if that maxim were to be made universal. Therefore, the board would need to go over each class of worker in the firm, figure their monetary value to the firm, and pay them accordingly. CEOs would then receive far less than they receive now, the board's profit would be less, and line workers would receive more---all based solely on production.
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