CHAPTER 2

BUSINESS ETHICS

DAVIDSON, KNOWLES & FORSYTHE

Business Law: Cases and Principles
in the Legal Environment (8th Ed.)
BUSINESS LAW: Cases & Principles
Davidson • Knowles • Forsythe 8th Ed.

ETHICS AND MORALITY

 The Law of Business must consider ethics
and morality.
– Ethics: guiding philosophy of a group, societal
values concerning right and wrong.
– Morals: principles of right and wrong
measured by an individual’s conscience.
– Ethics vary from society to society whereas
individual morals remain fairly constant.
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Davidson • Knowles • Forsythe 8th Ed.

ETHICAL THEORIES
 Consequential and Non-consequential
Principles.
– Consequential: evaluate action by examining
the consequences produced by the action.
– Non-consequential: focus of the concept of
“duty” rather than what is right or wrong.

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BUSINESS LAW: Cases & Principles
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ETHICAL THEORIES
 Consequential Ethics.
– Egoism: rightness determined by consequences the act
produces for person performing the action. Holds one
will act in a manner which produces greatest balance of
good over bad for oneself.
– Utilitarianism: rightness determined by consequences
the act produces for one’s group. Holds one should act
in such a manner which will, over time, produce most
good over bad for one’s group.
– Feminism: emphasizes attention be paid to the effect of
decisions on individuals. Focuses on character traits.

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BUSINESS LAW: Cases & Principles
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ETHICAL THEORIES
 Non-Consequential Ethical Theories.
– Kant and the Categorical Imperative: suggests certain
universal moral truths every person must follow in
order to act morally and ethically. Imperative that one
follow certain perfect truths.
– Rawls and the Veil of Ignorance: theory suggesting that
rules of ethical behavior be created by persons who
ignore their own characteristics and circumstances
including gender, race, ethnicity, and/or religion.

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BUSINESS LAW: Cases & Principles
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ETHICAL THEORIES
 Other Theories:
– Relativism: states that two people or two
societies may hold opposed ethical views to one
another, and yet both may be correct.
– The Golden Rule: advises each person to “do
onto others as you would have others do unto
you.”

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BUSINESS LAW: Cases & Principles
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A SYNTHESIS FOR ETHICAL

DECISION MAKING
 Individual and business factors to consider
when charting an ethical protocol:
– Short and long term impact on of the decision
on society and the organization.
– Who will be affected and to what degree by the
decision.
– Whether the decision and subsequent ethical
protocol is compatible with the law.

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BUSINESS LAW: Cases & Principles
Davidson • Knowles • Forsythe 8th Ed.

A SYNTHESIS FOR ETHICAL

DECISION MAKING

 Factors considered when making a decision:

– The obligations that arise from organizational
relationships.
– The ideals involved in any decisions that are
made.
– The effects or consequences of alternative
actions.
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BUSINESS LAW: Cases & Principles
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GAME THEORY OF BUSINESS ETHICS

 Business is an Amoral Institution: originally
held business to be amoral meaning they
could not act morally or immorally as they
were not natural persons.
 The “Game Theory”: operating a business is
like playing a game. No longer practical as
government now establish the rules (legal
regulations) for business.
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BUSINESS LAW: Cases & Principles
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SOCIAL CONTRACT THEORY

 Holds that businesses owe duties to society
as society allows business to exist. Social
Contract Theory considers:
– The Changing Social Environment.
– Problems with Business Ethics: no fixed
guidelines to follow and no formal code of
ethics that a business should follow.
 The Human Factor.
 The Legal Aspect.
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BUSINESS LAW: Cases & Principles
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MULTINATIONAL ETHICS
 Global Competition and Marketing
Opportunities.
– Demand business consider social values in
other countries where firms do business.

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RECOMMENDATION FOR BUSINESS

 Create framework for business ethics:

– Adopt synthesis approach to resolve ethical issues.
– Consider public image and consequences of actions.
– Adapt ethical standards as rapid change is constant in
business.
– Work with government rather than against
– Will not be easy but alternative is increased regulation
and public mistrust.

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