Moral Reasoning and Its Application in Business Ethics
Situation 1:
You are one of the most trusted employees in the
finance department of a successful company in Metro
Manila. You’ve been honestly and faithfully working
for the said firm for the last 20 years. Now, you are in
a terrible need for a big amount of money because
your only child has cancer. There is a big chance that
your child will be cured. You exhausted all acceptable
means but still you cannot raise the needed amount.
You know that you can easily get cash from your
office without others knowing it. You anticipate that in
just a matter of six months, you can return the money
that you will get. There is big chance that nobody from
your office would know that you “borrowed” cash.
Situation 2:
Kaye was an 18–year old Grade 12 student in the
business track program. She was very popular among
her classmates because she was friendly,
accommodating, intelligent, and helpful. Once during
a major examination, she saw that her seatmate and
friend Trisha was cheating. Kaye pretended that she
did not see anything. The next day, Kaye’s teacher
told her that he has some suspicions on the result of
Trisha’s exam. It was uncharacteristically high. He felt
that Trisha cheated and he asked Kaye whether she
noticed anything unusual during the exam.
What do you think Kaye’s reply be? Why does a
student find it difficult to report to his or her teacher a
classmate who he or she saw cheating? What will you
do if you were in Kaye’s situation? Do you think that
even if a student in the same situation were pressed
by the teacher to tell the truth, it would still be very
likely that he or she would deny that he or she know
anything about the cheating incident? Why is that so?
Everyday, many corporate people do things that
violate the ethical codes of their companies. And in
doing so, they may also commit some illegal and
unethical actions that have dangerous effects to the
public consumers, the community, the environment,
and other stakeholders.
However, even without actively participating in
criminal and unethical acts, passive observers and
silent witnesses “share the spotlight” with those who
commit these acts. This is because their passivity,
silence, and lack of courage to do something about
these acts imperil the lives of many people (for
example, due to exposure to toxic products and
dangerous services or products).
Why do we do the right act? Why do we avoid the
wrong act? Why do we not cheat during the
examinations? Why would a student find it difficult to
report the act of cheating of his or her classmates?
Indeed, it is just not enough that we do the right thing
and to avoid the wrong thing; one must assess his or
her motives for his actions.
Lawrence Kohlberg on Moral Reasoning
Level 1: Preconventional Morality
Why did Kohlberg use the term “conventional”?
~ By convention, he meant the accepted and agreed
upon norms, rules, and customs of the society.
What does it mean to be in the preconventional
level?
~ It means that the person is not yet fully aware of
the various ethical standards, laws, and customs
agreed upon and instituted y the community and the
society at large.
Who operates on the preconventional level?
~ The child is operating on this level because:
1. The child’s notion of right and wrong is under the
preconventional level.
2. The child is not yet fully conscious of his or her
actions.
Example: If a four-year old boy accidentally shot to
death his own father because he was playing with a
real gun, we do not put moral blame on the boy. It is
unreasonable to put him on the prison cell. It is
because he is not yet aware of the consequences of simply the fear of being criticized,
his actions. embarrassed, or losing his job.

There are two stages under preconventional level: As Kohlberg would say, there are people who
mature physically, but not morally. Externally,
Stage 1. Punishment-and-Obedience
one may see an honest person as a good
Orientation
person. But deeper analysis of his motives may
reveal something: that he tries to be good only
• Children are driven to act rightly because they
because of his fear of the physical punishment
are motivated by fear of punishment.
that a bad act may entail.
• Children understand that something is wrong or
bad when it has corresponding physical Thus, if there is a 100% guarantee that a bad
punishment. act will not be caught, and that there is a 100%
• “The physical consequences of action guarantee that a physical punishment will be
determining its goodness or badness, avoided, a person who operates on Kohlberg’s
regardless of the human meaning or value of first stage is more likely to do the bad act.
these consequences. Avoidance of punishment
and unquestioning deference to power are
Stage 2. Instrumental-Relativist
valued in their own right, not in terms of respect
Orientation
for an underlying moral order supported by
punishment and authority.” – Kohlberg and
• This stage refers to the moral disposition of
Hersh (1977)
children who are not yet aware of the rules and
• The following are the responses of children
regulations of the community and the society at
operating in the first stage:
large.
1. “It is wrong to get somebody’s chocolate
• Also known as the “reward orientation stage”
because my Mommy will scold me.”
• The child is oriented to the value of an act
2. “It is wrong to hit my playmate because my
based on the favors and rewards that he can
Daddy will punish me.”
get by performing the said act.
3. “It is wrong to say bad words because my
• The concept that the right action consists of
parents will punish me.”
that which instrumentally satisfies one’s own
For the child, the motive of doing a good act needs and occasionally the needs of others.
and avoiding a bad act is to avoid physical Human relations are viewed in terms like those
punishment. of the marketplace. Elements of fairness, of
reciprocity, and of equal sharing are present,
• Even though the punishment orientation is the
but they are always interpreted in a physical,
morality of the child, there are adults who also
pragmatic way. Reciprocity is a matter of ‘you
operate on this stage. Examples:
scratching my back and I’ll scratch yours,’ not
of loyalty, gratitude, or justice.
1. If a college student avoids cheating during
• Example:
examinations, maybe his primary reason is
1. One may observe that children are not only
simply to avoid the bad consequences that
driven by fear of punishment; they are also
it entails in the form of physical discomforts.
more motivated to act if they can get
2. If the owner of a business faithfully pays his
something in return, a sort of favor or
taxes, maybe his primary reason is simply
reward. Thus, the little boy will lend his toy
his fear of languishing in jail.
to his playmate if the latter would also
3. If an employee comes on time and does his
readily lend her toy.
job faithfully, maybe his primary reason is
 2. The seven-year-old girl would help in
cleaning her room if her mother promises
to buy her new pair of shoes.
A child would usually ask this question: “What
can I get in return if I do this?” Doing what is
right and good is based on a condition—the
favorable return that the act entails.
Again, one may observe that this orientation
also operated on adolescents or adults:
1. A college student may only befriend her
seatmate because she can get something
out of the friendship. When she can no
longer get favors, she can easily ignore the
friendship and look for another victim.
2. A business owner might contribute in some
community projects simply to advance his
business interest. In any case that he can
no longer see benefit for his business, he
would readily give up his hypocritical
concern for the community.
Level 2: Conventional Morality
Following Kohlberg’s developmental theory, it is
during adolescence that majority of people move from
preconventional to conventional morality.
In the conventional level, the person becomes
conscious that he or she is living in a society of
countless people with countless interests. He or she
realizes that the self-centeredness that characterizes
the preconventional level has to be given up if he or
she wants to be accepted and to survive in a society
of grown-up persons.
Stage 3. Good Boy, Nice girl
• The young adolescent becomes conscious of
his or her image and identity.
• He or she becomes concerned not only about
his or her physical appearance but also with his
or her overall aura that is projected to his or her
immediate circle of relationships—his or her
family, relatives, friends, and classmates.
• The concept that good behavior is that which
pleases or helps others and is approved by
them
• An adolescent might say:
1. “I will not cheat during exams because I
would be ashamed if I get caught.”
2. “I will study hard because my father
graduated with flying colors in this college.
I don’t want to taint our family’s name.”
3. “I will not attend the class anymore
because I want to please my friends.”
4. “I won’t tell my teacher even if my
classmate cheats because I might lose the
trust of my friends.”
5. “This act may be morally questionable but
it’s cool and trendy.”
• Applying this in the context of business ethics:
1. An employee might keep silent about
unethical conduct that he witnesses in the
workplace because he does not want to
rock the boat,” or to be perceived as a
sycophant or “walang pakikisama.”
2. An entrepreneur may be motivated to pay
the correct amount taxes, not because it is
the right thing to do, but because he or she
is after preserving, maintaining, and
upholding his or her public image.
3. An entrepreneur does his or her job simply
because the family expects him or her to
succeed even if he or she does not really
find satisfaction in what he or she is doing.
4. A businessperson may find out that his or
her peers devise methods to cheat their
customers. Thus, he or she also creates
ways to do the same, otherwise, his or her
colleagues will call him or her a “killjoy.”
• A person in the interpersonal conformity stage
may still be likely to do a bad act if there is
certainty of not getting caught. It is because his
or her main concern is not really the nature of
the act but what other people, especially his or
her immediate circle of relationships would say
about him or her.
 Stage 4. Law and Order Orientation
• moral development is manifested when a
person is not just concerned about being
punished, getting a reward, or being too
conscious about the expectation of family and
friends; rather, he or she simply realizes that the
law must always be upheld, respected, and
obeyed.
• A person who operates in this stage may be
prepared to disagree with family members or
even to become unpopular among his circle of
relationships in order to uphold the letters of the
law.
• Examples:
1. “I will pay my taxes though my buddies do
not because it is the law.”
2. “My family might not like my decision of
paying for the social benefits of the
employees in our family business, but I
have to disobey him because there is a law
that must be followed.”
3. “Even if your wife is sick and you do not
have money to buy medicines, you should
not steal. The law says so.”
4. “I pity your situation but it is the policy in
our organization.”
• The person does not just obey the rules out of
fear but out of respect for the law, recognition
of the authority of lawgivers, and concern for
social order.
Level 3: Postconventional Morality
It would seem that the legalist mindset marks
sufficient for moral reasoning; however, this is not the
case, according to Kohlberg. The legalist mindset
may be a sing of greater maturity in moral reasoning
compared with the earlier stages, but a person can
still advance in moral development.
In the postconventional morality, the person is no
longer determined and conditioned by “social
conventions” such as laws, written codes and agreed
standards. Rather, he or she exercises freedom and
becomes more conscious of the foundations of the
society’s norms such as the social contract and the
universal ethical principles of human rights, justice,
fairness, equality, human dignity, and common good.
The person is not enslaved by the letters of the law.
He or she goes above and beyond what the law says;
he or she sees that goodness cannot simply be
equated with following the law. He or she realizes that
there are instances when a person is even called to
criticize, violate, and even go against the law.
Stage 5. Social Construct Orientation
• The adult person reasons out that laws are
social contracts that people in the society agree
to promulgate and be bound by not only
because it ensures order and harmony. More
importantly, it is because laws uphold human
rights, justice, and the common good. In other
words, laws exist to serve the basic rights and
needs of each and every member of the
society.
• The stage-fiver person can see beyond the
“letters of the law,” recognizing that the “spirit
of the law” as anchored on the promotion of the
greatest benefit for all the members of the
society. Thus, he or she is always critical of laws
that seem to be oppressive, unjust, and
opposed to the promotion of the common good.
Laws should not be enslaving. Human laws are
not to be absolutized because many times, they
do not capture in words the reason for their
very existence. Hence, the stage-five person
sometimes sees that some laws must be
challenged, changed, and modified if by so
doing leads to the welfare of the society.
• Examples:
1. “I should not steal not only because I abide
by and respect the law, but because
stealing is a violation of one’s basic right to
property.”
2. “My employees will receive salary higher
than what the law requires because they
have a basic right to the profit of my
company.”
3. “Even of if there is no law on profit-sharing
and even if my employees are only entitled
to what their contract states, I should
consider the spirit of the law on wage-
 giving: commensurate, compensation, 2. The stories of heroes and other people who
decent life, justice and fairness, dignity of risk their loves for the sake of truth and
labor, and dignity of the laborer.” justice
4. “I may own the titles of many lands, but
those lands also belong to my tenants even
if they do not own the titles. It is because
they cultivate it. Besides, I have more than
what I need.”
• It is also because of stage five moral thinking
that there are some revolutionaries in the
society who defy oppressive leaderships and
authoritarian rulers. There revolutionaries see
that when laws become oppressive and unjust,
they cease to be called laws because they
contradict and defeat the very purpose of law
and lawmaking.

Stage 6. Universal Ethical Principles

• The pinnacle of moral reasoning that only a few
people reach this stage
• The morally mature person is no longer
governed by fear of punishment, nor by reward,
by social expectations, by societal laws and
precepts, or by basic social contracts. Rather,
the person is simply propelled by the right thing
to do. This right act if neither subjective nor
relative because it is anchored on universal
ethical principles that are, according to
Kohlberg, valid for all people at all times.
Therefore, one’s conscience is formed and
developed based on these universal ethical
principles.
• Examples:
1. A person who discloses the illegal and
unethical activities of his or her company or
organization may endanger not only his or
her job security but even his or her own life
and that of his or her family. However, he or
she courageously carries on blowing the
whistle because he or she knows that it is
the right thing to do, that it is what his or her
conscience is telling him or her, and that he
or she is now a completely free and
autonomous person governed only by his
or her personally adopted universal ethical
standards.