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BUSINESS ETHICS
CHAPTER 1
Understanding Ethics

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Chapter Objectives
When you completed this chapter, you will be able to:
1. Define Ethics
2. Explain the role of values in ethical decision making
3. Understand opposing ethical theories and their
limitations
4. Discuss ethical relativism
5. Explain an ethical dilemma and apply a process to
resolve it

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What is Ethics?
Ethics is about how we meet the challenge of
doing the right thing when that will cost more than
we want to pay.

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What is Ethics?
Ethics is the study of how we try to live our lives
according to a standard of ‘right’ or ‘wrong’
behavior.
• Moral standards or ethical principals that provide
guidance on how we carry out our daily lives.

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Moral and Values

• Moral is a set of principles by which an individual
aim to live his/her life
• When an individual try to formalize those moral
principles into his/her behavior, it forms his/her
value.

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Types of Values
• Intrinsic value
• Something is said to have intrinsic value when it is
valuable and itself.
• According to Immanuel Kant, moral actions are
intrinsically valuable
• Instrumental value
• Something is said to have instrumental value when it is
seen as a mean to an end.

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Value Conflict
• Happens when the value an individual holds is in direct
conflict with an action.
• The gray area of ethics, very difficult to determine whether
an action is right or wrong.
• Your response define your personal value system.
• For example:
a. Lying is wrong; but what if you were lying to protect the
life of a loved one?
b. Stealing is wrong; but what if you were stealing food for
a starving child?
c. Killing I wrong; but what if you had to kill someone to
protect your own life?
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To Conclude, What is Ethics?

• The four basic categories of ethics:
I. Simple truth
• Doing the right thing
II. Personal Integrity
• The personal characteristic of an individual
III. Rules of appropriate individual behavior
• The values and standards we develop
IV. Rules of appropriate behavior for a community or society
• The values and standards that are acceptable by a
society

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The Golden Rule of Ethics

• Do to others as you would have them do to you, or treat
others as you would like to be treated
 Confucius: Do not do to others what you would not want them to do
to you.
 Buddhism: Hurt not others is ways that you yourself would find hurtful
 Christianity: Therefore all things whatsoever would that men should
do to you, do you even so to them
• The danger of the golden rule is that not everyone thinks
like you, acts like you or believes in the same principles
that you do.

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The Three Ethical Theories

1. Virtue Ethics
• The concept was established by the Greek philosopher
Aristotle
• Focus on establishing individual character and integrity; what
type of person you want to be
• The problem with virtue ethics is that your personal value
might not be accepted by the society.
2. Ethics for the Greater Good (Utilitarianism)
• Focus on the greatest good for the greatest number of people
• The outcome of an action is more important than the action
itself
• The problem with utilitarianism is that it justify the means with
the end; you cannot justify an action to be good merely
because it benefits a greater number of people.

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The Three Ethical Theories

3. Universal Ethics (Code)
• Proposed by a German philosopher named Immanuel
Kant.
• Argues that there are certain and universal principles that
should apply to all ethical judgement
• Example:
1. Helping old ladies to cross the street
2. Be kind to animals
• The problem is that no one will be held accountable for
the action
• Not all universally accepted principles are good.

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Ethical Relativism
• Ethical relativism is the theory that holds that morality is
relative to the norms of one's culture.
• An individual’s ethical principles are form through the
combination of the traditions of their society, their personal
opinions and experience.
• Against the idea of universal standard, whether an action is right
or wrong depends on the moral norms of the society in which it is
practiced.

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Applied Ethics: Ethical Dilemma

• Ethical dilemma is the situation where you face a situation
in which there is no obvious right or wrong decision, but
rather a right or right answer.
• In general, to resolve ethical dilemma, you are most likely
required to make decisions that will:
1. Leave an equally right choice undone
2. Suffer something bad as a result of that choice
3. Contradicts a personal ethical principle in making that
choice
4. Abandon an ethical value of your community or society

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Resolving Ethical Dilemma

• Three-step model in resolving ethical dilemma
1. Analyze the consequences
2. Analyze the actions
3. Make a decision
Choose the lesser of two evils
Arrive at an outcome that you can live with

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Ethical Reasoning
• The ability to identify, assess, and develop ethical
arguments from a variety of ethical positions.

Lawrence Kohlberg’s Stages of Ethical Reasoning

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Level 1: Preconventional
• Lowest level: A person’s response to a perception of right
and wrong is initially directly linked to the expectation of
punishment or reward.
Stage 1: Obedience and punishment orientation
• A person is focused on avoidance of punishment and
deference to power and authority

Stage 2: Individualism, instrumentalism and exchange

• A person is focused on satisfying his or her own needs

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Level 2: Conventional
• Middle level: A person begin to consider social perception
into making decision.
Stage 3: Good boy/ nice girl orientation
• A person is focused on meeting the expectations of family
members.

Stage 4: Law-and-order orientation

• A person is increasingly aware of his or her membership in
a society and the existence of code of behavior.

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Level 3: Postconventional
• Highest level: A person begin to make a clear effort to
define personal principles and moral values rather than
simply complying to social norm.
Stage 5: Social contract legalistic orientation
• A person is focused on individual rights and develop ethical
standards based on principles that have been critically
examined by the society.

Stage 6: Universal ethical principal orientation

• A person is focused on self-chosen ethical principles that
are found to be comprehensive and consistent.
• Conscious choices reflecting the individual’s value system

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