Lecture 1

Ethics and Business

Shushanik Safaryan
Topics

• Overview
• What is Business Ethics?
• Horatio Alger and Stock Options
• The Myth of Amoral Business
• The Relation of Business and Morality
• Business Ethics and Ethics
• The Case of the Collapsed Mine

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OVERVIEW

• Business is an important part of contemporary society & it involves all

of us, one way or another.
• Business is not something separate from society or imposed on it, it’s
an integral part of society.
• Morality consists of rules of human behavior & specifies that certain
actions are wrong or immoral & that others are right or moral.
• Since business activity is human activity, it can be evaluated from a moral
point of view, just as any other human activity can be so evaluated.

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WHAT IS BUSINESS ETHICS?

•The term business ethics is used in several

different senses
• (1) ethics in business
• (2) business ethics as a movement
• (3) business ethics as part of the general field of
ethics.

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What’s the Aim of Business Ethics?

• It is neither defense of the status quo nor its radical

change.
• Rather, it should serve to remedy those aspects or
structures that need to change, and it should protect
those that are moral.

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HORATIO
ALGER
Horatio Alger (1832-1899) wrote a
series of “rags to riches” stories,
involving success through the
“energetic and dedicated work of
the hero.”
“Luck and Pluck”
The belief that those who worked hard
could make it.
Hard work and a little luck were all that
needed.

The belief received a new impetus

in the high-tech industry.
Microsoft is the best-known
example.
Pay was noncompetitive & long hours
were expected but stock options made
early employees millionaires.
As the industry matured, later
employees unfairly did not do as well.

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STOCK OPTIONS
• Stock options have been one way in which the American “dream” was
instantiated – companies made stock options a feature of employee
compensation in lieu of higher compensation.
• As stock options rose, many employees, particularly in high-tech companies,
became very wealthy –on paper.
• As the market dropped, and the value of the stock dropped below the strike
price, the weaknesses and volatility of the stock option programs was made clear.
• Additionally, the large blocks of stock given to top executives far exceeded those
options given to employees.
• The disparity seems to have influenced both the rags to riches image of
Horatio Alger and the suspicion that those who had exceeding wealth had
acquired it unscrupulously.
• The American people have for a long time been ambivalent in their
response, and despite a growing consensus that ethics has a role to play in
business, the public view of business is still expressed in what can be called
the Myth of Amoral Business.
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MYTH OF AMORAL BUSINESS

• Expresses the ambivalence of many toward business

and a popular, widespread view of Business. The myth
has several variations:
• Business is amoral insofar as ethical considerations are
inappropriate to business
• Because business is business.
• Ethical language is simply not the language of business.
• Many businesses act unethically not because of a desire to
do evil,
• But simply because they want to make a profit &
• Therefore disregard some of the consequences of their actions.

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The Breakdown of the Myth of Amoral
Business
• By the reporting of scandals and the concomitant
public reaction to these reports;
• By the formation of popular groups such as the
environmentalists and the consumerists;
• By the concern of business in ethics,
• as expressed in conferences,
• magazine and newspaper articles,
• & the burgeoning of corp. codes of ethical conduct & of
ethics programs.
• It’s better than admitting you’re stupid.

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THE RELATION OF BUSINESS TO
MORALITY
• The business of business
• The moral background of business
• The changing mandate for business

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 The Business of Business

• What is considered to be business & its business varies

from society to society.
• Defining business per se & its proper concern is a
social question that must be answered in a social
context.
• The limits & demands imposed on business by society
are frequently moral ones.

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The Moral Background of Business

• Morality consists of rules of human behavior & specifies that

certain actions are wrong or immoral and that others are right
or moral.
• Since most businesses value their reputations, we don’t really
live in a “dog-eat-dog” business world.
• Because the ordinary person does not need to be told that lying &
stealing are wrong that they form part of the background of business.
• The limits set by society on business are often moral, but
they’re also often written into law.
• The retreat to law as the norm to guide business is reflects
that most managers do not know how to handle many moral
issues in business.

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 The Changing Mandate for Business

• The social mandate to business is not only given in

law.
• Today the mandate to business is more complex.
• Corporations are asked to consider the impact of their
decisions and actions on the environment, the public,
and the common good.
• Business must consider what structures promote
moral responsibility and facilitate the weighing of
moral and other values.

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BUSINESS ETHICS & ETHICS

•The term business ethics is used in three

different senses:
• ethics in business
• business ethics as a movement
• business ethics as part of the general field of ethics.

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Ethics Studies Morality

• Morality is a term to cover practices & activities:

• that are considered importantly right & wrong;
• the rules that govern those activities; and
• the values that are embedded, fostered, or pursued by those
activities & practices.
• Ethics is a systematic attempt to make sense of our
individual and social moral experience, in such a way
as to determine the rules that ought to:
• govern human conduct,
• the values worth pursuing, and
• the character traits deserving development in life.

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 General Ethics

• Descriptive ethics is closely related to anthropology,

sociology, and psychology
• Normative ethics builds on the whole that descriptive
ethics provides and attempts to supply and justify a
coherent moral system based on it
• Metaethics is the study of normative ethics, and, to
some extent, both normative and descriptive ethics
involve some metaethical activity

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Special Ethics

• Causitry is the art of solving difficult moral problems,

cases, or dilemmas through careful application of
moral principles.
• Applying general ethics to specialized fields yields
business ethics, medical ethics, engineering ethics,
professional ethics, etc.

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Business & Business Ethics Defined

•“Business” includes any and all economic

transactions
• between individuals,
• between individuals & profit-making organizations,
• between profit-making organizations and other
such organizations.
•Business ethics as a field is defined by the
interaction of ethics & business

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Business Ethics Involves 5 Activities

• The application of general ethics principles to particular cases

or practices in business.
• Metaethics: whether moral terms generally used to describe
individuals & actions can also be applied to organizations,
businesses & collective entities.
• Analysis of business presuppositions - both moral
presuppositions & those from a moral point of view.
• Study of embedded problems that go beyond the field of
ethics & into other areas of philosophy & into other
knowledge domains, like econ. & org. theory.
• Describing morally praiseworthy & exemplary acts of either
individuals in business or particular firms.
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CASE OF THE COLLAPSED MINE

• Though this case is fictitious, the reality of collapsed mines in

the coal industry is a real dilemma.
• Miners were digging coal 1000s of metres below ground.
• An explosion traps 8 miners in a pocket.
• The cost of reaching the men in time to save their lives would amount to
several million dollars.
• The problem facing the manager was whether the expenditure of such a
large sum was worth it.
• What, after all, was a human life worth?
• Who should make the decision, and how should it be made?
• Did the manager owe more to the stockholders of the corporation or to the trapped
workers?
• Should he use the slower, safer, cheaper way of reaching them & save
money, or the faster, more dangerous, more expensive way, & maybe save
lives?
End