Business Ethics

Chapter 1 – The Nature of Morality

ETHICS (Moral Philosophy) – deals with the individual character and the moral rules and limit our
conduct. It investigates questions of right and wrong, duty and obligation and moral responsibility.

BUSINESS ETHICS- is the study of what constitutes right or wrong ( or good or bad) human conduct
in business context, closely related moral questions arise in other organizational context.

MORAL STANDARDS
 Concern behaviour that seriously affects human well-being
 Takes priority over other standards
 The soundness of moral standards depends on the adequacy of the reasons that support them

 Morality must be distinguish from etiquette ( rules for well-mannered behaviour), from law (
statutes, regulations, common law and constitutional law), and from professional code of ethics
( the special rules governing the member of a profession)
 The rules for etiquette are prescriptions for socially acceptable behaviour. If you violate them,
you’re likely to be considered ill-mannered, impolite or even uncivilized, but not necessarily
immoral.
 Scrupulous observance of rules of etiquette, does not make a person moral.

MORALITY AND LAW

 Statutes – legislative bodies

 Common Law- judge made law; valid if it harmonizes with statutory law
 Constitutional Law- court rulings

 Legality should not be confused with morality. Breaking the law isn’t always or necessary
immoral, and legality of an action doesn’t guarantee its morality

1. An action can be illegal but morally right

Some philosophers believe that sometimes the illegality of an action can make it
morally wrong, even if the action would otherwise have been morally acceptable.
But even if they are right about that, the fact that something is illegal does not
trump all other moral consideration.

Non conformity to the law is not always immoral, There can be circumstances
where all things considered, violating the law is morally permissible, perhaps
even morally required.

2. An action that is legal can be morally wrong

Law codifies a society’s customs, ideals, norms, and moral values

If a society’s laws are sensible and morally sound, it is a mistake to see them as
sufficient to establish a moral standards that guide us.
Professional Code of Ethics

Not all the rules of a professional code are purely moral in character, and even when they are,
the fact that a rule is officially enshrined as part of the code of the profession does not guarantee that
it is sound moral principle

You should take seriously the code that governs your profession, but you still have a responsibility
to assess its rules for yourself

Adherence to a professional code does not exempt your conduct from scrutiny from the
broader perspective of morality.

Where do standards come from?

 For philosophers, the important issue is not where our moralprinciples came from but wheter
they can be justified.

Religion and Morality

 We are finite and bound to earth, not only capable of wrong doing but also born morally
flawed (original sin). On the other we transcend nature and realize infinite possibilities.
 Morality needn’t rest on religion
The idea of morality must be must be based on religion can be interpreted in 3
different ways, none of which is plausible.

 Often we act morally oout of habit or just because that is the kind of
person we are.
 The need to appease our conscience and the desire to avoid earthly
punishment may all motivate us to act morally
 The moral instruction of the world’s greatest religion are general and
imprecise, they do not relieve us of the necessity to engage in moral
reasoning ourselves.

-Morality is not necessarily based on religion. Although we draw our moral beliefs from many sources,
for philosophers the issue is whether those beliefs are justified.

Ethical Relativism
 Merely a function of what a particular society happens to believe
 The theory that what is right in one place may be wrong in another, because the only criterion
in distinguishing right from wrong – and so the only ethical standard for judging an action – is
the system of the society in which the act occurs
 What morality requires is relative to society
 Ethical disagreement does not imply that all opinions are equally correct

Unsatisfactory Implications
1. It undermines any moral criticism of the practices of other societies as long as their actions
conform to their own standards.
2. The fact that for the relativist there is no such thing as ethical progress. Although moralities
may change, they cannot get better or worse.
3. It makes no sense for people to criticize principles or practices accepted by their own society.
Relativism and the Game of Business
 Business has its own norms and rules that differ from those of the rest of the society
  Business has its own moral standards and business actions should be evaluated only by those
standards

HAVING MORAL PRINCIPLE

 When a principle is part of a persons’ moral code, that person is strongly motivated toward the
conduct required by the principle and against behaviour that conflicts with that principle.
 To accept moral principle is not purely intellectual act like accepting hypothesis or a
mathematical theorem. Rather, it also involves a desire to follow that principle for its own sake,
the likelihood of feeling guilty about not doiong so and a tendency to evaluate the conduct of
others according to the principle in question

CONSCIENCE
 Accepting a moral principle involves a motivation to conform one’s conduct to that principle.
Violating the principle will bother one’s conscience, but conscience is not a perfectly reliable
guide to right an wrong.
 The Limits of Conscience
1. When we are genuinely perplexed about what we ought to do, we are trying to figure out
what our conscience ought to be saying to us.
2. It may not always be good for us to follow our conscience. It all depends on what our
conscience says.

Moral Principle and Self-Interest

 Morality restrains our self-interested desires. A societies moral standards allow conflicts to be
resolved by an appeal to shared principle of justification
 If you do the right thing only because you think you will profit from it, you are not really
motivated by moral concerns
 Having a moral principle involves having a desire to follow the principle for its own sake simple
because it is the right thing to do
 Part of the point of morality is to make social existence possible by restraining self-interested
behaviour.
 Sometimes doing what is morally right conflict with one’s personal interests. In general though
following your moral principles will enable you to live a more satisfying life
 When morality and self interest conflict, what you choose to do will depend on the kind of
person you are
 People often find greater satisfaction in a life lived according to moral principle and in being the
kind of person that entails, than a life devoted solely to self gratification.

MORALITY AND PERSONAL VALLUES

 In a narrow sense , morality is the moral code on an individual or a society
 Concern principles that do or should regulate people’s conduct and relations with others
 Morality in sense of the rules of principles that regulate toward others can be distinguished
from morality in the broader sense of the values, ideals and aspirations that shape a person’s
life
 When we develop our truly human capacities sufficiently to achieve this human excellence will
have lives blessed with happiness
 How we understand this excellence is a function of our values, ideals, and worldwide views –
our morality in broad sense

INDIVIDUAL INTEGRITY AND RESPONSIBILITY

Organizational Norms
  Pressure to meet corporate objectives, to be a team player and to conform to org norms can
lead people to act unethically
 Conformity, Groupthink
 Several aspects of corporate structure and function work to undermine individual moral
responsibility. Org norms, pressure to conform (sometimes leading to group think) and
diffusion of responsibility inside large organizations can all make the exercise of individual
integrity difficult

Diffusion of Responsibility
- Pressure to conform to the group and to adhere to its norms and beliefs can lead to the
surrender of individual moral autonomy
- Diffusion of responsibility inside an organization can weaken people’s sense of moral
responsibility

 The more people who are observing an event, the less likely in any one of them to feel obliged
to do anything (bystander apathy)
 Business corporations are no worse than other groups, but many of them do little to protect
individual integrity and moral autonomy
 Moral judgements should be supported by moral standards and relevant facts
 Moral reasoning and argument typically appeal both to moral standard and relevant facts.
Moral judgements should be entailed by the relevant moral standards and the facts, and they
should not contradict our other beliefs. Both standards and facts must be assessed when
moral arguments are being evaluated
 Philosophical discussion generally involves the revision and modification of arguments, in this
way progress is made in the analysis and resolution of moral and other issues.

Requirements for Moral Judgements

1. Moral judgements should be logical (standard, the conduct or policy, goal is to be able to
support moral judgements with reasons and evidence, rather than basing them solely on
emotions)
2. Based on Facts
3. Based on acceptable moral principle

Conformity with our considered moral beliefs is an important consideration in evaluating moral
principles. A considered moral belief is one held only after we have made a conscientious efforts to
be conceptually clear, to acquire all relevant information, and to think rationally, impartially and
dispassionately about the belief and its implications. We should doubt any moral principle that
clashes with many of our considered beliefs.

Chapter 2 – Normative Theories of Ethics

CONSEQUENTIALIST AND NONCONSEQUENTIALIST THEORIES

CONSEQUENTIALIST- moral theories see the moral rightness or wrongness of actions as a function
of their results. Good (consequence); Right (action). Bad (consequence); wrong (action).

The right act is the one that produces (or will probably produce) at least as great a ration of good to
evil as any other course of action open to the agent.

Egoism – advocates individual self-interest as its guiding principle

Utilitarianism – holds that one must take into account everyone affected by the action.

Both theories agree that rightness and wrongness are solely a function of an action’s results

NONCONSEQUENTIALIST (Deontological) – right and wrong are determined by more than the likely
consequences of an action. It believes that the other factors are also relevant to the moral
assessment of an action.

EGOISM
 The view that equates morality with self interest
 An act is morally right if and only if it best promotes an agent’s interest.
 Use personal advantage as the standard for measuring actions rightness.

Personal Egoists – pursue their own best interest, but they do not say what others should do.
Impersonal Egoists- claim that everyone should let self-interest guide his or her conduct.

Misconceptions:
Hedonism – the view that pleasure is the only thing that is good in itself, that it is the ultimate
good, the one thing in life worth pursuing for its own sake.

 Egoist cannot act honestly, be gracious and helpful or otherwise promote other people’s
interest.
 Egoism tells us to benefit others when we expect that our doing so will be reciprocated or
when the act will bring us pleasure or in some way promote our own good.

PSYCHOLOGICAL EGOISM
 The only moral obligation we have is to ourselves
 Basic moral principle from the alleged fact that human beings are by nature selfish creatures
 People are, as a matter of fact so constructed that they must behave selfishly

According to egoism, we should assist others when doing so best promotes our own interests.

Problems with Egoism

1. Psychological egoism is not sound theory
- Psychological egoist can always claim that some yet-to-be identified subconscious egoistic
motivation is the main impulse behind any action.
2. Ethical Egoism is not really a moral theory at all
- The moral standards of a society provide the basic guidelines for cooperative social
existence and allow us to resolve conflicts by appeal to
3. Ethical egoism ignores blatant wrongs
- Egoism takes no stand against such seemingly immoral acts as theft, murder, racial and
sexual discrimination
- Egoism must respond to the widely observed human desire that at least sometimes seems
stronger than competing selfish desires,
- A moral principle that allows the possibility of murder in the cause of self-interest offends
our basic instructions about right or wrong; it clashes with one of our firmest moral
convictions.

UTILITARIANISM
- Is the moral doctrine that we should always act to produce the greatest possible balance of
good over bad for everyone affected by our actions.
 - Argued for the utilitarian principle that actions are right if they promote the great human
welfare, wrong if they don’t ( Bentham)
- Viewed human beings as having elevated faculties that allow them to pursue various higher
kinds of pleasure. The pleasures of the intellect and imagination, in particular have a higher
value than those of mere physical sensation ( Mills)
- Both men equated pleasure and happiness and considered pleasure the ultimate value

Six Points about Utilitarianism

1. When deciding which action will produce the greatest happiness, we must consider
unhappiness or pain as well as happiness
2. Actions affect people to different degrees
3. Because utilitarian’s evaluate actions according to their consequences and because actions
produce different results in different circumstances, almost anything might, in principle, be
morally right in some particular situation.
4. Utilitarian wish to maximize happiness not simply immediately but in the long run as well
5. Utilitarian acknowledge that we often do not know with certainty what the future consequences
of our action will be
6. When choosing among possible actions, utilitarianism does not require us to disregard our own
pleasure, nor should we give it added weight.

Utilitarianism in an Organizational Context

1. Provides clear, and straightforward basis for formulating and testing policies
- By utilitarian standards, an org policy, decision or action is good if it promotes the general
welfare more than any other alternative
2. Utilitarianism provide an objective and attractive way of resolving conflicts of self interest
3. Provides a flexible, result-oriented approach to moral decision making

Critical Inquiries of Utilitarianism

1. Utilitarianism is not really workable

2. Some actions are wrong even if they produce good result
3. Utilitarianism incorrectly overlooks considerations of justice and the distribution of happiness

NONCONSEQUENTIALISM APPROACH

Kant’s Ethics
- Kant sought moral principles that do not rest on contingencies and that define actions as
inherently right or wrong apart from any particular circumstances
- Moral rules can in principle be known as a result of reason alone and are not based on
observations
- Kant believe that moral reasoning is not based on factual knowledge and that results of our
actions do not determine whether they are right or wrong
- Must not sought in human nature nor in the circumstances of the world
- Kant’s theory is an important of a purely non consequentiality approach to ethics. Kant held
that only when we act from duty does our action have moral worth. Goodwill is the only
thing that is good in itself.
GOODWILL
 Nothing, said Kant, is good in itself except goodwill.
 Kant believed that their goodness depends on the will that makes use of them
 Contain in the notion of goodwill is the concept of duty: only when we act from a sense of duty
does our action have moral worth
  According to Kant, if you do not will the action from the sense of your duty to be fair and
honest, your actions lack moral worth. Actions have true moral worth only when they spring
from recognition of duty and a choice to discharge it.

The Categorical Imperative

 Kant believed that reason alone can yield a moral law. We need not to rely on empirical
evidence relating to consequences and to similar situations
 For Kant, an absolute moral truth must be logically consistent, free from internal contradiction
 Kant’s categorical imperative says that we should always act in such a way that we can will the
maxim of our action to become a universal law.
 By maxim, Kant meant the subjective principle (or rule) that people in effect formulate in
determining their conduct
 Kant Insisted that the morality of any maxim depends on whether we can logically will to
become a universal law
 Kant: moral laws prescribe categorically not hypothetically
 Kant’s categorical imperative states that an action is morally right if and only if we can we can
will that the maxim (or principle) represented by our action be a universal law. For example a
person making a promise with no intention of keeping it cannot universalize the maxim
governing his action because if everyone followed this principle, promising would make no
sense. Kant believed that the categorical imperative is binding all rational creatures, regardless
of their specific goals or desires and regardless of the consequences.

Universal Acceptability

 You can embrace something as a moral law only if all other rational beings can also
embrace it
 The test of the morality of a rule then, is not whether people in fact accept it but whether
all rational being thinking impartially and rationally would accept it regard less of
whether they are the doors or the receivers of the action.

Humanity as End, Never as merely a means

 As rational creatures we should treat other rational creatures as ends in themselves and
never as only means to our ends
 Kant believes that every human being has inherent worth resulting from the sheer
possession of rationality. We must always act in a way that respects this humanity in
others and in ourselves.
 Because rational beings recognize their own inner worth, they would never wish to be
used as entities possessing worth only as means to an end.

Kant in an Organizational Context

1. The categorical imperative gives us firm rules to follow in moral decision making, rules that do
not depend on circumstances or results and that do not permit individual exceptions.
2. Kant’s theory puts the emphasis of organization’s decision making where it belongs: on
individual’s organization after all, involve human beings working in concert to provide goods
and services for other human beings.
3. Kant stresses the importance of motivation and acting on principles. It is not enough to the
right thing ; an action has moral worth only if it is clone from a sense of duty- that is, from a
desire to do the right thing for its own sake
-Kant’s ethics gives us a firm standard that do not depend on results; it injects a humanistic element
into moral decision making and stresses the importance of acting on principle and from a sense of
duty.

Critical View:
1. Kant’s view of a moral worth is too restrictive
2. The categorical imperative is not a sufficient test of right and wrong
3. Distinguishing between treating people as means and respecting them as ends in themselves
may be difficult in practice.

Other Non Consequentialist Perspectives

1. Prima Facie (Ross)

 Our lives are intertwined with other people’s particular ways, and we have, as a result, certain
specific moral obligation
 An obligation that can be overridden by a mere important obligation

2. Assisting Others
 Believe that we have some obligation to promote the general welfare, but they typically view
this obligation less stringent for example, the obligation not to injure people.
 They see us having stronger obligation to refrain from violating people’s right than to promote
their happiness or well-being.

Moral Rights
 A right is an entitlement to act or have others acts in a certain way.
 If you have a right to do something; then someone else has a correlative duty to act in a
certain way

Human Rights
- moral rights that are not result of special relationships or specific circumstances

4 Characteristics

1. HR are universal
2. Closely related, HR are equal rights
3. HR are not transferable, nor can they be relinquish
4. HR are not natural rights, not in the sense that they do not depend on human
institutions the way legal rights do.

2 Broad Categories

1. Negative- reflect the vital interests that human beings have in being free from outside
interference
2. Positive- reflect the vital interests that human beings have in receiving certain benefits

Nonconsequentialism in an Organizational Context

1. Stresses that moral decision making involves weighing of different moral factors and
consideration. It recognizes that an organization that an organization must usually take into
account other equally important moral concerns.
 2. Acknowledges that the organization has its own legitimate goals to pursue. There are limits to
the demands of morality, and organization that fulfils its morally free to advance whatever ends
it has.
3. Stresses the importance of moral rights. Moral rights place distinct and firm constraints on
what sorts of things an org can do to fulfil its own ends

Critics:
1. NC principles are adequately justified
2. NC can satisfactorily handle conflicting rights and principles.

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 RULE UTILITARIANISM is a hybrid theory. It maintains that the correct principles of right and
wrong are those would maximize happiness if society adopted them. RU applies the utilitarian
standard not directly to individual actions but rather to the choice of the moral principles that
are to guide individual actions. It avoids many of the standard criticism of act utilitarianism.

 Despite disagreements on controversial theoretical issues, people can make significant

progress in resolving practical moral problems through open minded and reflective discussion.
One useful approach is to identify (possibly conflicting)

 Obligations, Ideals and Effects (Ruggiero) in given situation and then to determine where the
emphasis should lie among these different considerations.

 Any action that honours obligation while respecting ideals and benefiting people can can be
presumed to be moral