Business Ethics

Concepts & Cases

Manuel G. Velasquez

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Chapter One
Basic Principles: Ethics and
Business

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The Nature of Business

Ethics
Ethics: is the principles
of conduct governing an

individual or group.
Personal ethics refer to the rules by which an
individual lives his/her personal life.
Ethics is a kind of investigation and includes both
the activity of the investigation as well as the
result of the investigation, whereas morality is the
subject matter that ethics investigates.
Moral values can usually be expressed as
statements describing objects or features of
objects that have worth, such as Honesty is
good and Injustice is bad.

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Ethics and Morality

Ethics is the study of morality.
Morality = The standards that an individual or a
group has about what is right and wrong, or good
and evil.
Example: B.F. Goodrich A7-D Fraud

Moral Standards = norms about the kinds of actions

that we believe are morally right or morally wrong,
as well as the values placed on what is morally
good or bad. Such as ( always tell the truth).
Non-Moral Standards: The standards by which we
judge what is good or bad and right or wrong in a
non-moral way. Such as etiquette (respect others
feeling), law, and language.
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Five Characteristics of Moral

Standards

Involve significant injuries or benefits like has moral

standards against ( murder, children abuse, fraud,
theft)
Not established by authority figures (it doesnt
change depend on what someone wants, but depends on
the reasons that are taken to support and justify them).
Should be preferred to other values including selfinterest. ( it doesnt mean that its wrong act, but it is
wrong to choose self interest over morality).
Based on impartial considerations (lying to get
benefit)
Associated with special emotions and vocabulary.
(guilt, shame, remorse = regret)
http://www.youtube.com/watch?v=nrSuNipvS4U
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What is Business Ethics?

Broadly, ethics is the discipline (correction or training or
path) that examines ones moral standards or the moral
standards of a society to evaluate their reasonableness
and their implications for ones life. (to determine
whether these standards are reasonable or unreasonable
in order to apply them to concrete situations). It asks
how we apply these standard in our life.
The aim of ethics is to develop a body of moral standards
that we are reasonable to hold.
Business ethics is a specialized study of moral right and
wrong that concentrates on moral standards as they
apply to business institutions, organizations, and
behavior.
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Types of Ethical Issues

Systemicethical questions about the social,
political, legal, or economic systems within
which companies operate. (Included laws,
regulation and industrial structures).
Corporateethical questions about a
particular corporation and its policies,
culture, climate, impact, or actions. (About
morality of activities , policies and practice)
Individualethical questions about a
particular individuals decisions, behavior, or
character. (Include the morality of decisions ,
action, or character of an individual).
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Can ethical qualities be

attributed to corporations?
View #1: corporations, like people, act
intentionally and have moral rights, and
obligations, and are morally responsible.
View #2: it makes no sense to attribute ethical
qualities to corporations since they are not like
people but more like machines; only humans
can have ethical qualities.
View #3: humans carry out the corporations
actions so they are morally responsible for what
they do and ethical qualities apply in a primary
sense to them; corporations have ethical
qualities only in a derivative sense.
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Arguments Against Business

Ethics
In a free market economy, the pursuit of
profit will ensure maximum social benefit
so business ethics is not needed. (Like
bribery, fraud, deceptive advertising or
concealing products hazard).
A managers most important obligation is
loyalty to the company regardless of
ethics.
So long as companies obey the law they
will do all that ethics requires.
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Arguments Supporting
Business Ethics

Ethics applies to all human activities.

Business cannot survive without ethics.
Ethics is consistent with profit seeking.
Customers, employees, and people in
general care about ethics.
Studies suggest ethics does not detract
from profits and seems to contribute to
profits.
http://www.dailymail.co.uk/news/article-2563015/WVa-pizza-worker-caugh
t-urinating-sink-fired.html
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Corporate Social
Responsibility
Corporate social responsibility refers
to a corporations responsibilities or
obligations toward society. (Pollution)
Business ethics is both a part of
corporate social responsibility and
part of the justification for corporate
social responsibility.
Shareholder vs. Stakeholder Theory
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New Issues in Business

Ethics

Advances in technology often create new

issues for business ethics.
Currently, advances in information technology
are creating new issues in business ethics.

Increasing connections between the

economic and social systems of different
nations, known as globalization, has also
created new issues in business ethics.

http://education-portal.com/academy/lesson/impact-of-technology-on-privac
y.html#lesson

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Resolving Cross-Cultural
Ethical Differences
Moral Relativism = the theory that there are no ethical
standards that are absolutely true and that apply or
should be applied to the companies and people of all
societies. Ethics are different from society to another.
Moral relativism may be any of several descriptive, metaethical, or normative positions regarding the differences
in moral or ethical judgments between different people
and cultures
Objections to Moral Relativism:
Some moral standards are found in all societies;
Moral differences do not logically imply relativism;
Relativism has incoherent consequences;
Relativism privileges (distinguish) whatever moral
standards are widely accepted in a society.
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Resolving Cross-Cultural
Ethical Differences
According to the Integrative Social
Contracts Theory (ISCT), there are two
kinds of moral standards:
Hypernorms: those moral standards that
should be applied to people in all societies.
Microsocial norms: those norms that differ
from one community to another and that
should be applied to people only if their
community accepts those particular norms.

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Cont
Hypernorms take priority over
microsocial norms.
When the manager is operating in
foreign community , he/her should follow
the microsocial norms of the community.
So long as the do not violate any
hypernorms. But if the microsocial norms
violate the hypernorms the manager
should not follow the microsocial norms.
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Lawrence Kohlbergs Three Levels of Moral

Development

First Level: Pre-conventional Stages

Stage One: punishment and obedience orientation
Stage Two: instrumental and relative orientation
Example to punish the child for good thing and to
reward him for good thing.
Second Level: Conventional Stages
Stage One: interpersonal concordance orientation
Stage Two: law and order orientation
Example, to be good son/daughter for your family, to
be the loyal to your own larger nation or society or
society duties.

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Con
t
Third Level: Post-conventional Stages
Stage One: social contract orientation
Stage Two: universal principles orientation
Example, the person aware that everyone has
his opinion or view and they can reach
consensus by agreement or contract. The last
stage is reaching to the right action by
comprehensiveness and universality .
Gilligan and kohlberg agreed that we cratically
and reflectively examine the adequacy of our
moral standards. Therefore, the central aims of
ethics is the stimulation of this moral
development by discussing, analyzing the moral
reasoning that we and other do .
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Moral Reasoning
The reasoning process by which human
behaviors, institutions, or policies are
judged to be in accordance with or in
violation of moral standards.
Moral reasoning involves:
The moral standards by which we evaluate
things
Information about what is being evaluated
A moral judgment about what is being
evaluated.
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Four Steps Leading to Ethical

Behavior

Step One: Recognizing a situation is an ethical situation.

Requires framing it as one that requires ethical reasoning Situation is likely to be seen as
ethical when:
involves serious harm that is concentrated, likely, proximate, imminent or near to
done, and potentially violates our moral standards
(recognize that the situation we have encountered is one that calls for ethical reasoning.
It might be a personal, business, legal or family situation)
Obstacles to recognizing a situation:
1-Euphemistic labeling, down sizing instead of firing
2-justifying our actions, We can tell ourselves that the harm we intend is
justified because we are pursuing a worthy cause.
3-advantageous comparisons, Comparing the situation to other larger evils
4-displacement of responsibility, By claiming that whoever told us to do the
harm was primarily responsible for the harm
5-diffusion of responsibility, I can say it was really the team that did the
harm and I only had a small role in the situation
6-distorting the harm (deny) , and dehumanization, and attribution of blame.
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Four Steps Leading to Ethical

Behavior
Step Two: Judging the ethical course
of action.
Requires moral reasoning that applies
our moral standards to the information
we have about a situation.
Requires realizing that information about
a situation may be distorted by biased
theories about the world, about others,
and about oneself.
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Four Steps Leading to Ethical

Behavior
Step Three: Deciding to do the ethical
course of action.
Deciding to do what is ethical can be
influenced by:
The culture of an organizationpeoples
decisions to do what is ethical are greatly
influenced by their surroundings.
Moral seductionorganizations can also
generate a form of moral seduction that can
exert subtle pressures that can gradually lead
an ethical person into decisions to do what he
or she knows is wrong.
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Four Steps Leading to Ethical

Behavior
Step Four: Carrying out the ethical
decision.
Factors that influence whether a person
carries out their ethical decision include:
Ones strength or weakness of will
Ones belief about the locus of control of
ones actions

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Moral Responsibility
Three Components of Moral
Responsibility
Person caused or helped cause the
injury, or failed to prevent it when he or
she could and should have (causality).
Person did so knowing what he or she
was doing (knowledge).
Person did so of his or her own free will
(freedom).
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Factors that Mitigate (reduce)

Moral Responsibility
Minimal contribution
In general, the less ones actual actions contribute to
the outcome of an act, the less one is morally
responsible for that outcome.

Uncertainty
A person may be fairly convinced that doing
something is wrong yet may still be doubtful about
some important facts, or may have doubts about the
moral standards involved, or doubts about how
seriously wrong the action is.

Difficulty
A person may find it difficult to avoid a certain course
of action because he or she is subjected to threats or
duress of some sort or because avoiding that course
of action will impose heavy costs on the person.
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