Ethics Notes 111

BUSINESS ETHICS NOTES
BUSINESS ETHICS
Ethics refers to principles that define behavior as right, good and proper. Such principles
do not always dictate a single “moral” course of action, but provide a means of evaluating
and deciding among competing options.
Ethics is two things. First, ethics refers to well based standards of right and wrong that
prescribe what humans ought to do, usually in terms of rights, obligations, benefits to
society, fairness, or specific virtues. Ethics also means… the continuous effort of studying
our own moral beliefs and our moral conduct, and striving to ensure that we, and the
institutions we help to shape, live up to standards that are reasonable and solidly-based.
The question of what is ethical and what is unethical has been debated since the time of
Aristotle. In a practical sense, policies, regulations, standards, prevailing practices, and
codes of ethics exist to guide the decisions about what ought to be done.
Kantian theory then focuses on the route or means to attain the end, as opposed to the
outcome. According to Kant, even if the outcome involves the pain of another, it may be
considered ethical. An individual’s act is considered ethical if the means of arriving at the
outcome was ethical and stemmed from a sense of duty to do so.
Humans are moral actors free to make choices and are able to judge the morality of any
action by applying Kant’s famous Categorical Imperative i.e. “Act only on that maxim by
which you can and at the same time will, so that it shall become a universal law.” In other
words, we judge an action by applying it universally.
“Always act to treat humanity, whether in yourself or others, as an end in itself, never merely
as a means.” In other words, we may not use or manipulate others to achieve our own
happiness
The concept of morality; refers to the social and business practices of determining right
from wrong using policies, regulations, standards, prevailing practices, and codes of ethics
that exist to guide the decisions about what ought to be done.
Moral reasoning begins with the consideration of a moral or ethical issue (“moral” and
“ethical” are used interchangeably). In the context of reasoning, an issue is a matter of
dispute with two or more distinct sides. Not surprisingly, an ethical issue is an issue that
involves a moral component.
However, an assessment of morality based on adherence to practices and historical

tradition is not adequate to deal with the complexities of the broader topic of ethics.
Ethical Reasoning is reasoning about right and wrong human conduct. It requires people to
be able to assess their own ethical values and the social context of problems, recognize
ethical issues in a variety of settings, think about how different ethical perspectives might
be applied to ethical dilemmas and consider the ramifications of alternative actions
Ethical or moral reasoning is a critical part of decision making. Each day, even on normal
days, each person faces a variety of moral decisions. Some moral decisions are small, such
as whether to use the last of the milk. Others are larger, such as whether to lie about an
affair. Some are extremely large, such as whether one should torture prisoners for
Prepared by mpaata zaid– (MUBS) Page 1

information or not. Regardless of the size of the moral decision, a person’s ability to make a
moral decision in a rational manner depends on his/her ability to engage in moral
reasoning.
Ethical Decision making process
Step 1: Become more aware of ethical problems that can arise (i.e., Identify ethical
problems).
Step 2: Objectively consider the well-being of others and society when analyzing
alternatives
Step 3: Clarify and apply ethical values when choosing a course of action.
Step 4: Work toward ongoing improvement in personal, organizational, and social ethics.
Broad areas of business ethics and key terms
Ethical Values; are beliefs about what is right and wrong and what is important in life.
Ethical values rest on principles stressing the importance of treating everyone fairly and
equally. To make ethical decisions, an organization purposefully implants ethical
instrumental values in its culture.
Ethical values are a product of societal, professional, and individual ethics.
The following are examples of values. You might use these as the starting point for
discussing values within your organization: ambition, competency, individuality, equality,
integrity, service, responsibility, accuracy, respect, dedication, diversity, improvement,
enjoyment/fun, loyalty, credibility, honesty, innovativeness, teamwork, excellence,
accountability, empowerment, quality, efficiency, dignity, collaboration, stewardship,
empathy, accomplishment, courage, wisdom, independence, security, challenge, influence,
learning, compassion, friendliness, discipline/order, generosity, persistency, optimism,
dependability, flexibility.
As a leader, choose the values and the ethics that are most important to you, the values and
ethics you believe in and that define your character.
Morals are principles of right and wrong behaviors. They are standards or principles of
good behavior.
Virtues. These are simply behaviors or attitudes that show high moral standard.
Aristotle defines Virtues as acquired human qualities, the excellence of characters which
enable a person to achieve a good life.
Kohlbergian four components and addressed the Kohlbergian deficiencies by designing a

model consisting of the following;
 Moral sensitivity; is the ability to is the ability to assess, contextualize the situation,
empathize and comprehend alternative possibilities for action and consider how
certain behaviors may elicit certain outcomes before one can make a judgment. It is
considered to precede moral judgment logically (Rest, Narvaez, Bebeau, & Thoma,
1999a, p. 101). Complex human thought is a product of collecting information, and

processing and responding to feedback loops that occur in the mind when
determining a final decision to act in a given manner.
 moral judgment, Moral judgment, the reasoning ability to determine which action is
morally right or wrong, is one component among three that influence whether one
chooses an ethical decision.
 Moral motivation; the prioritization of competing values and “committing to a moral
course of action” as well as “taking responsibility for the outcome” (Walker, 2002, p.
355).
 Moral character; is best described as the ability to carry out or implement an action
once decided.
Ethics & Leadership
 What leaders do and who leaders are is determined by the nature of the leaders’
behavior and their virtuousness.
 What choices leaders make and how they respond in a particular circumstance are
informed and directed by their ethics.
Creating an ethical organizational climate requires leaders to have and present role model
ethical behaviors, and reward ethical policies and practices, punish unethical behavior,
discuss ethical assumptions and practices, and use charismatic/transformational leader
behaviors in a socially responsible manner. Many leaders are turning to spiritual/religious
practices to help them deal with ethical issues.
Leaders know what they value. They also recognize the importance of ethical behavior. The
best leaders exhibit both their values and their ethics in their leadership style and actions.
Your leadership ethics and values should be visible because you live them in your actions
every single day.
A lack of trust is a problem in many workplaces. If leaders never identified their values in
these workplaces, the mistrust is understandable. People don't know what they can expect.
If leaders have identified and shared their values, living the values daily, visibly will create
trust. To say one sentiment and to do another will damage trust - possibly forever.
Different approaches have been suggested for dealing with these issues, such
as;
 following universal moral laws,
 greatest good for the greatest number,(utilitarian theory)
 having a primary concern for others’ welfare, (Kantian theory)
 promoting high moral character in leaders, (virtue ethics)
 Persistently striving to be just, prudent, and truthful in one’s behavior. (justice and
rights theory by John lock)

Two Broad Areas of Ethics in relation to Business
1. Managerial mischief/harm/misbehavior includes "illegal, unethical, or questionable

practices of individual managers or organizations, as well as the causes of such behaviors
and remedies to eradicate them." There has been a great deal of information written about
managerial mischief, leading many to believe that business ethics is merely a matter of
preaching the basics of what is right and wrong. More often, though, business ethics is a
matter of dealing with dilemmas that have no clear indication of what is right or wrong.
2. Moral mazes. The other broad area of business ethics is "moral mazes of management"
and includes the numerous ethical problems that managers must deal with on a daily basis,
such as potential conflicts of interest, wrongful use of resources, mismanagement of
contracts and agreements, etc.
Key Roles and Responsibilities of Management in ethics.
Development of ethics programmes
An ethics programme is a set of continuous activities that are designed, implemented and
enforced to prevent and detect misconduct.
Depending on the size of the organization, certain roles may prove useful in managing
ethics in the workplace. These can be full-time roles or part-time functions assumed by
someone already in the organization. Small organizations certainly will not have the
resources to implement each, However, the following functions point out responsibilities
that should be included somewhere in the organization.
The organization's chief executive must fully support the program ;If the chief
executive isn't fully behind the program, employees will certainly notice and this apparent
hypocrisy may cause such cynicism that the organization may be worse off than having no
formal ethics program at all. Therefore, the chief executive should announce the program,
and champion its development and implementation. Most important, the chief executive
should consistently aspire to lead in an ethical manner. If a mistake is made, he/she should
admit it.
Consider establishing an ethics committee at the board level; The committee would be
charged to oversee development and operation of the ethics management program.
Consider establishing an ethics management committee; It would be charged with
implementing and administrating an ethics management program, including
administrating and training about policies and procedures, and resolving ethical dilemmas.
The committee should be comprised of senior officers.
Consider assigning/developing an ethics officer (ombudsperson);this role is becoming

more common, particularly in larger and more progressive organizations. The ethics officer

is usually trained about matters of ethics, helps in coordinating development of the policies
and procedures to institutionalize moral values in the workplace particularly about
resolving ethical dilemmas by interpreting policies and procedures.
Note that one person must ultimately be responsible for managing the ethics
management program.
Myths about Ethics
1. Myth: Business ethics is a matter of religion than management. It is not altering people's
values or souls are not the aim of an organizational ethics program managing values and
conflict among them is the aim of ethics.
2. Myth: Our employees are ethical so we do not need attention to business ethics. Most of
the ethical dilemmas faced by managers in the workplace are highly complex. Like under
the following the following situations Significant value conflicts among differing interests,
real alternatives that are equality justifiable, and Significant consequences on
"stakeholders" in the situation. Kirrane mentions that when the topic of business ethics
comes up, people are quick to speak of the Golden Rule, honesty and courtesy.
Nevertheless, when presented with complex ethical dilemmas, most people realize there is
a wide "gray area" when trying to apply ethical principles.
3. Myth: Business ethics is a discipline best led by philosophers, academics, theologians,

and only a fad for manager and engineers. It has nothing to do with day to day working
organization. However, ethics is a discipline with a programmatic approach that includes
several practical tools.
4. Myth: Business ethics is superfluous -- it only asserts the obvious: "do good!" Many
people react that codes of ethics, or lists of ethical values to which the organization aspires,
are not required because they represent values to which everyone should naturally aspire.
However, the value of codes of ethics to an organization is its priority and focus regarding
certain ethical values in that workplace. For example, it is obvious that all people should be
honest. However, if an organization is struggling around continuing occasions of
dishonesty in the workplace, a priority on honesty is very timely -- and honesty should be
listed in that organization’s code of ethics. Note that a code of ethics is an organic
instrument as opposed to being mechanistic that does not change according to time.
5. Myth: Business ethics is a matter preaching and it is meant for people who are unethical.
In organizations many times good people can take bad actions, particularly when stressed
or confused. Stress or confusion is not excuse for unethical actions. Managing ethics in the
workplace includes everyone working as a team to help each other and remain ethical and
to work through confusing and stressful ethical dilemmas.
6. Myth: Many believe business ethics is a recent phenomenon because of increased

attention to the topic in popular and management literature. However, business ethics was
written about even 2,000 years ago -- at least since Cicero wrote about the topic in his On
Duties. Business ethics has gotten more attention recently because of the social
responsibility movement that started in the 1960s.

7. Myth: Ethics cannot be managed. In reality, they are managed indirectly. For example,
the behavior of the organization's founder will be a strong moral influence on behavior or
employees in the workplace.
8. Myth: Business ethics and social responsibility is the same thing. The social
responsibility movement is one aspect of the overall discipline of business ethics.
It is application of ethics to the corporate community, a way to determine responsibility in

business dealings, the identification of important business and social issues, and a critique
of business.
9. Myth: Our organization is not in trouble with the law, so we are ethical. One can often be
unethical, yet operate within the limits of the law, e.g., withhold information from
superiors, inflate travel bills, complaining about others and pretending that they are the
most efficient, etc. However, breaking the law often starts with unethical behavior that has
gone unnoticed. The "boil the frog" phenomena are a useful parable here: If you put a frog
in hot water, it immediately jumps out. If you put a frog in cool water and slowly heat up
the water, you can eventually boil the frog. The frog does not seem to notice the adverse
change in its environment.
10. Myth: Managing ethics in the workplace has little practical relevance. Managing ethics
in the workplace involves identifying and prioritizing values to guide behaviors in the
organization, and establishing associated policies and procedures to ensure those
behaviors are conducted. One might call this "values management." Value management is
also highly important in other management practices, e.g., managing diversity, Total
Quality Management and strategic planning.
Development of ethics programmes
An ethics programme is a set of continuous activities that are designed, implemented and
enforced to prevent and detect misconduct. The common elements of formal ethics
programmes include the following:
 Formal ethics codes, which articulate a firm's expectation regarding ethics, written
down as a number of responsibilities.
 Ethics committees charged with developing ethical policies, evaluating company or
employee actions, and/or investigating and adjudicating policy violations.
 Ethics communication systems, providing a means for employees to report abuses or

obtain guidance as to responsibilities.
 Ethics officers or ombudspeople charged with coordinating policies, providing ethics

education, or investigating allegations.
 Ethics training programmes, aimed at helping employees to recognize and respond

to ethical issues.

 Disciplinary processes to address irresponsible behavior.
Ethics programs should include;

· Establish organizational roles to manage ethics
· Schedule ongoing assessment of ethics requirements
· Establish required operating values and behaviors
· Align organizational behaviors with operating values
· Develop awareness and sensitivity to ethical issues.
· Integrate ethical guidelines to decision making.
· Structure mechanisms to resolving ethical dilemmas.
· Facilitate ongoing evaluation and updates to the program.
Guidelines for Managing Ethics in the Workplace
The following guidelines ensure the ethics management program is operated in a

meaningful approach:
Recognize that managing ethics is a process; Ethics is a matter of values and associated
behaviors. Values are discerned through the process of ongoing reflection. Therefore, ethics
programs may seem more process-oriented than most management practices. Managers
tend to be skeptical of process-oriented activities, and instead prefer processes focused on
deliverables with measurements. However, experienced managers realize that the
deliverables of standard management practices (planning, organizing, motivating,
controlling) are only tangible representations of very process-oriented practices. Ethics
programs do produce deliverables, e.g., codes, policies and procedures, budget items,
meeting minutes, authorization forms, newsletters, etc. However, the most important
aspect from an ethics management program is the process of reflection and dialogue that
produces these deliverables.
Determine preferred behaviors in the workplace. ; As with any management practice,

the most important outcome is behaviors preferred by the organization. The best of ethical
values and intentions are relatively meaningless unless they generate fair and just
behaviors in the workplace. That's why practices that generate lists of ethical values, or
codes of ethics, must also generate policies, procedures and training that translate those
values into appropriate behaviors.
The best way to handle ethical dilemmas is to avoid their occurrence in the first
place; That’s why practices such as developing codes of ethics and codes of conduct are so
important. Their development sensitizes employees to ethical considerations and
minimizes the chances of unethical behavior occurring in the first place.
Make ethics decisions in groups, and make decisions public, as appropriate; This
usually produces better quality decisions by including diverse interests and perspectives,

and increases the credibility of the decision process and outcome by reducing suspicion of
unfair bias.
Integrate ethics management with other management practices; When developing the
values statement during strategic planning, include ethical values preferred in the
workplace. When developing personnel policies, reflect on what ethical values you'd like to
be most prominent in the organization's culture and then design policies to produce these
behaviors.
Use cross-functional teams when developing and implementing the ethics
management program; it’s vital that the organization’s employees feel a sense of
participation and ownership in the program if they are to adhere to its ethical values.
Therefore, include employees in developing and operating the program.
Value forgiveness; This may sound rather religious, but it’s probably the most important
component of any management practice. An ethics management program may at first
actually increase the number of ethical issues to be dealt with because people are more
sensitive to their occurrence. Consequently, there may be more occasions to address
people’s unethical behavior. The most important ingredient for remaining ethical is trying
to be ethical. Therefore, help people recognize and address their mistakes and then support
them to continue to try operate ethically.
Note that trying to operate ethically and making a few mistakes is better than not
trying at all.
Some organizations have become widely known as operating in a highly ethical manner.
Unfortunately, it seems that when an organization achieves this strong public image, it's
placed on a platform by some business ethics writers. All organizations are comprised of
people and people are not perfect. However, when a mistake is made by any of these
organizations, the organization has a long way to fall. In our increasingly critical society,
these organizations are accused of being hypocritical. Consequently, some leaders may
come out publicly to announce an ethics management program. It's the trying that counts
and brings peace of mind.
Benefits of Managing Ethics in the Workplace
The management of ethics in the workplace holds tremendous benefits for everyone,
benefits both moral and even practical. This is particularly true today when it is critical to
understand and manage highly diverse values in the workplace.
Attention to business ethics has substantially improved society. Most of the injuries to
workers were never attended to; disabled workers were condemned to poverty and often
to starvation. Employees were selected and terminated based on personal liking and
dislikes of managers. Influence was applied through intimidation and harassment. Then
society reacted and demanded that businesses place high value on fairness and equal rights
and as a result Unions were organized. Laws and regulations were established.

Ethics programs help maintain a moral course in turbulent times; Attention to

business ethics is critical during times of fundamental change. Times much like those faced
now by businesses, both nonprofit and for-profit. During times of change, there is often no
clear moral compass to guide leaders through complex conflicts about what is right or
wrong. Continuing attention to ethics in the workplace sensitizes leaders and staff to act
consistently.
Ethics programs cultivate strong teamwork and productivity; Ethics programs align
employee behaviors with those top priority ethical values preferred by leaders of the
organization. Usually, an organization finds surprising disparity between its preferred
values and the values actually reflected by behaviors in the workplace. Ongoing attention
and dialogue regarding values in the workplace builds openness, integrity and community
are critical ingredients of strong teams in the workplace. Employees feel strong alignment
between their values and those of the organization. They react with strong motivation and
performance.
Ethics programs support employee growth and learning;. Attention to ethics in the
workplace helps employees face reality, both good and bad in the organization and
themselves. Employees feel full confidence they can admit and deal with whatever comes
their way.
Ethics programs help ensure that policies are legal; there is increasing number of
lawsuits about personnel matters and to effects of an organization’s services or products
on stakeholders. Ethical principles are often legal matters. These principles are often
applied to current, major ethical issues to become legislation. Attention to ethics ensures
highly ethical policies and procedures in the workplace. It is far better to incur the cost of
mechanisms to ensure ethical practices now than to incur costs of litigation later. A major
intent of well-designed personnel policies is to ensure ethical treatment of employees, e.g.,
in matters of selection, evaluating, disciplining, and separating.
Ethics programs help avoid criminal acts “of omission” and can avoid punishments.
Ethics programs tend to detect ethical issues and violations early on so they can be
reported or addressed.
Ethics programs help manage values associated with quality management, strategic
planning and diversity management; Ethics programs identify preferred values and
ensuring organizational behaviors are aligned with those values. This effort includes
recording the values, developing policies and procedures to align behaviors with preferred
values, and then training all personnel about the policies and procedures. This overall
effort is very useful for several other programs in the workplace that require behaviors to
be aligned with values, including quality management, strategic planning and diversity
management. Total Quality Management includes high priority on certain operating values,
e.g., trust among stakeholders, performance, reliability, measurement, and comments...
Ethics management programs are also useful in managing diversity. Diversity is much more
than the color of people’s skin -- it is acknowledging different values and perspectives.

Diversity programs require recognizing and applying diverse values and perspectives these
activities are the basis of a sound ethics management program.
Ethics programs promote a strong public image; Attention to ethics is also strong public
relations admittedly, managing ethics should not be done primarily for reasons of public
relations. Nevertheless, the fact that an organization regularly gives attention to its ethics
can portray a strong positive to the public. People see those organizations as valuing
people more than profit, as striving to operate with the utmost of integrity and honor.
Aligning behavior with values is critical to effective marketing and public relations
programs.
It helps in managing ethical values in the workplace, legitimizes managerial actions,

strengthens the alignment of the organization’s culture, and improves trust in relationships
between individuals and groups. It supports greater consistency in standards and qualities
of products, and cultivates greater sensitivity to the impact of the enterprise’s values and
messages.
ETHICS, MORALITY AND THE LAW
The concept of morality; refers to the social and business practices of determining right
from wrong using policies, regulations, standards, prevailing practices, and codes of ethics
that exist to guide the decisions about what ought to be done.
MORALITY AND MORAL PROBLEMS
Morality is concerned with the norms, values and beliefs embedded in social processes
which define the right and wrong for an individual community. All individuals have
morality, a basic sense of right and wrong in relation to a particular activity.
The manager as a moral person is characterized in terms of individual traits; as a moral
manager, he is thought of as conveying an ethics message that others take notice of in their
views and behaviors.
Moral problems are concerned with the harms caused or brought about by others, and
particularly with the harms caused or brought to others in ways that are outside their own
control. It could be argued that moral problems associated with strategic decision making
are complex because the harms to some individuals or groups are predictably associated
with benefits to other individuals or groups.
Reasoning refers to any systematic mental process that constructs or evaluates

implications from premises of some sort and take a decision that has high moral values.
Ethical/moral Reasoning is reasoning about right and wrong human conduct. It requires
people to be able to assess their own ethical values and the social context of problems,
recognize ethical issues in a variety of settings, think about how different ethical

perspectives might be applied to ethical dilemmas and consider the ramifications of

alternative actions.
Moral reasoning itself has two essential components: an understanding of what

reasonable moral standards are required, and evidence or information concerning whether
a particular policy, person, institution, or behavior has the features of these moral
standards. People often fail to make their moral standards clear when they make a moral
judgment.
Moral reasoning begins with the consideration of a moral or ethical issue (“moral” and
“ethical” are used interchangeably). In the context of reasoning, an issue is a matter of
dispute with two or more distinct sides. Not surprisingly, an ethical issue is an issue that
involves a moral component. An example of an ethical issue is whether capital punishment
is morally acceptable or not.
Moral Responsibility and Blame Moral responsibility is directed not only at judgments
concerning right or wrong. Sometimes, they are directed at determining whether a person
or organization is morally responsible for having done something wrong. People are not
always responsible for their wrongful or injurious acts.
Peoples’ ethical self identity evolves as they practice ethical decision-making skills and
learn how to describe and analyze positions on ethical issues and as such .Ethical or moral
reasoning is a critical part of decision making.
Moral Issues. ; While there are many ways to respond to an ethical issue, the following
discussion focuses on approaching an ethical issue from the standpoint of reason and
assumes that the goal is to attempt to resolve the issue in a rational manner.
An ethical issue will have three main components: non-moral facts, concepts and, the moral
or ethical aspects. In order to adequately and rationally resolve an ethical issue each of
these components must be considered.
Beauchamp and Bowie (2004) aptly contrast morality in relation to ethical theory by
stating that ethical theory addresses “the nature and justification of right actions” revealing
the “philosophical reasons for and against aspects of the morality stipulated by society” and
is the basis upon which one adopts a “whole system of moral principles or virtues”.
The development of ethical reasoning abilities is vitally important both for living an ethical
life and creating an ethical world. Unfortunately, most people confuse ethics with behaving
in accordance with social conventions, religious beliefs, and the law. Most people do not see
ethics as a domain unto itself, a set of concepts and principles that guide us in determining
what behavior helps or harms conscious creatures. Most people do not recognize that
ethical concepts and principles are universally defined, through such documents as the UN
Declaration of Human Rights, and that these concepts and principles are trans-cultural and
trans-religious.

One need not appeal to a religious belief or cultural convention to recognize that slavery,
genocide, torture, sexism, racism, murder, assault, fraud, deceit, and intimidation are all
ethically wrong.
Whenever ethical conclusions are based on religious or cultural standards, there must be a
separation between those who hold contrary religious or cultural beliefs. It is critical,
therefore, that we use shared ethical concepts and principles as guides in reasoning
through common ethical issues.
All spoken languages contain synonyms for desirable ethical traits such as being kind,
open-minded, impartial, truthful, honest, compassionate, considerate, and honorable. They
also contain hundreds of negative ethical traits such as being selfish, greedy, egotistical,
heartless, dishonest, hypocritical, disingenuous, prejudiced, spiteful, vindictive/malicious,
cruel, brutal, and oppressive.
The essential meanings of these terms are not dependent on either theology or social
convention. Living an ethical life emerges from the fact that people are capable of either
helping or harming others, of contributing to or damaging the quality of their lives. In
addition to the ability to distinguish purely ethical terms from those that are theological or
conventional /conservative, skilled ethical reasoning presupposes the same range of
intellectual skills and traits required in other domains. One must be skilled in breaking
reasoning down into its component parts. One must be proficient in assessing reasoning for
its clarity, accuracy, relevance, depth, breadth, and logicalness. One must be intellectually
humble, intellectually perseverant, and intellectually empathic.
ETHICAL REASONING PROCESS

1. What are the facts?
2. What are the ethical issues?
3. Who are the stakeholders?
4. What are the alternatives?
5. What is your ethical evaluation of the alternatives?
6. What are the constraints?
7. What decision should be made?
8. How should the decision be implemented?
Evidence that a rapid decline in public trust and respect for public servants is
demonstrated vis-à -vis increased and expanded laws, regulations, and policies, designed to
enforce accountability in performance and improved ethicality. Posner and Kouze’s (1993)
research supported this view in evidencing a loss of public trust in public servants from the
1960s through the 1980s and beyond. The seemingly continual loss of reputational capital
can be tremendous and manifests itself in the form of an inability to garner the support and
following of others since the institution itself has been deemed as incompetent or
untrustworthy.
Kohlberg’s Stages of Moral Development

Kohlberg has focused on moral development and has proposed a stage theory of moral
thinking.
Kohlberg, who was born in 1927 a psychologist, at first thinking he would become a clinical
psychologist. However, he soon became interested in moral issues and began interviewing
children and adolescents on moral issues. He used the result on his doctoral dissertation
(1958),
Kohlberg is an informal, unassuming man who also is a true scholar; he has thought long
and deeply about a wide range of issues in both psychology and philosophy and has done
much to help others appreciate the wisdom of many of the "old psychologists,"
In particular, he says that younger children base their moral judgments more on
consequences, whereas older children base their judgments on intentions.
Kohlberg therefore interviewed both children and adolescents about moral dilemmas, and
he did find stages that go well beyond Piaget's. He uncovered six stages, only the first.
His basic interview consists of a series of dilemmas such as the following:
Heinz Steals the Drug
In Europe, a woman was near death from a special kind of cancer. There was one drug that
the doctors thought might save her. It was a form of radium that a druggist in the same
town had recently discovered. The drug was expensive to make, but the druggist was
charging ten times what the drug cost him to make. He paid $200 for the radium and
charged $2,000 for a small dose of the drug. The sick woman's husband, Heinz, went to
everyone he knew to borrow the money, but he could only get together about $ 1,000
which is half of what it cost. He told the druggist that his wife was dying and asked him to
sell it cheaper or let him pay later. But the druggist said: "No, I discovered the drug and I'm
going to make money from it." So Heinz got desperate and broke into the man's store to
steal the drug-for his wife. Should the husband have done that? (Kohlberg, 1963, p. 19)
Kohlberg is not really interested in whether the subject says "yes" or "no" to this
dilemma but in the reasoning behind the answer
or why the person is making that choice The interviewer wants to know why the subject
thinks Heinz should or should not have stolen the drug. The interview schedule then asks
new questions which help one understand the child's reasoning. For example, children are
asked if Heinz had a right to steal the drug, if he was violating the druggist's rights, and what
sentence the judge should give him once he was caught. Once again, the main concern is with
the reasoning behind the answers. The interview then goes on to give more dilemmas in
order to get a good sampling of a subject's moral thinking.
Level I
Preconvention Morality

Focuses on self-pain or pleasure.

Stage 1
Obedience and Punishment Orientation.
The child assumes that powerful authorities hand down a fixed set of rules which he or she
must unquestioningly obey. To the Heinz dilemma, the child typically says that Heinz was
wrong to steal the drug because "It's against the law," or "It's bad to steal," as if this were
all there were to it. When asked to elaborate, the child usually responds in terms of the
consequences involved, explaining that stealing is bad "because you'll get punished"
Kohlberg calls stage 1 thinking "preconventional" because children do not yet speak as
members of society. Instead, they see morality as something external to themselves,
Stage 2
Individualism and Exchange.
At this stage children recognize that there is not just one right view that is handed down by
the authorities. Different individuals have different viewpoints. "Heinz," they might point
out, "might think it's right to take the drug, the druggist would not." Since everything is
relative, each person is free to pursue his or her individual interests.
 One boy said that Heinz might steal the drug if he wanted his wife to live, but that he
doesn't have to if he wants to marry someone younger and better-looking.
 But maybe he shouldn't steal it because they might put him in prison for more years
than he could stand.
 Although stage 2 respondents sometimes sound a moral, they do have some sense of
right action. This is a notion of fair exchange or fair deals. The philosophy is one of
returning favors-"If you scratch my back, I'll scratch yours." To the Heinz story, subjects
often say that Heinz was right to steal the drug because the druggist was unwilling to
make a fair deal;
 Or they might say that he should steal for his wife "because she might return the favor
some day.
Stages one and two represent the simplest moral reasoning abilities - preconvention.
Individuals functioning at these stages of moral development exhibit high levels of
egocentrism and make moral judgments based on motivations of self-interest and fear of
external repercussions like punishments. Understanding the needs of others, the greater
good, and altruism are relatively incomprehensible at either of these stages.
 Therefore Decisions are based on rules set by authorities. Concerned with obedience
and punishment.
 Decisions are based on individual’s interests. They are Concerned with personal
benefit
Level II
Conventional Morality
Focuses on others-society’s values, norms, and expectations.
Stage 3
Good Interpersonal Relationships

At these stage children-who are by now usually entering their teens see morality as more
than simple deals. They believe that people should live up to the expectations of the family
and community/society and behave in "good" ways. Good behavior means having good
motives and interpersonal feelings such as love, empathy, trust, and concern for others.
As such they typically argue,
 the man was right to steal the drug because "He was a good man for wanting to save
her," and "His intentions were good, that of saving the life of someone he loves."
Even if Heinz doesn't love his wife.
 These subjects often say, he should steal the drug because "I don't think any
husband should sit back and watch his wife die".
 Some urged that motives of the man were good, the druggist's were bad. The
druggist, stage 3 subjects emphasize, was "selfish," "greedy," and "only interested in
himself, not another life.” and I think anyone would. I don't think they would put
him in jail. The judge would look at all sides, and see that the druggist was charging
too much.
 The 13 yr old boy defines the issue in terms of the actors' character traits and
motives. He talks about the loving husband, the unfair druggist, and the
understanding judge. His answer deserves the label "conventional "morality"
because it assumes that the attitude expressed would be shared by the entire
community-"anyone" would be right to do what Heinz did.
Stage 4
Maintaining the Social Order.
 Stage 3 reasoning works best in two-person relationships with family members or
close friends, where one can make a real effort to get to know the other's feelings
and needs and try to help.
 At stage 4, in contrast, the respondent becomes more broadly concerned with
society as a whole. Now the emphasis is on obeying laws, respecting authority, and
performing one's duties so that the social order is maintained.
 In response to the Heinz story, many subjects say they understand that Heinz's
motives were good, but they cannot condone/forgive (and /or compromise with)
the theft. What would happen if we all started breaking the laws whenever we felt
we had a good reason? (Consider if an act can be universally acceptable).
 Because stage 4, subjects make moral decisions from the perspective of society as a
whole, they think from a full-fledged member-of-society perspective.
 Superficially, stage 1 and stage 4 subjects are giving the same response (when one
steals he/she breaks the law), so we see here why Kohlberg insists that we must
probe into the reasoning behind the blatant response.
 Stage 1 children say, "It's wrong to steal" and "It's against the law," but they cannot
elaborate any further, except to say that stealing can get a person jailed.
 Stage 4 respondents, in contrast, have a conception of the function of laws for
society as a whole--a conception which far exceeds the grasp of the younger child.
At stages three and four, individuals are guided by societal convention and possess a
greater awareness of societal influences and expectations which include an understanding
of the obligation and duty to uphold the law. Individuals functioning at these stages of

moral development exhibit a high need for approval and make moral judgments on the
basis of the expectations set by some external entity.
Therefore,
 Decisions are based on what others (typically those close to the decision maker) would
view as right and they are Concerned with others’ approval.
 Decisions are based on maintaining the larger social order. Concerned with
community/society stability.
Level III
Post conventional Morality
Focuses on the values and principles that make a good society.
Stage 5
Social Contract and Individual Rights
 At stage 5, people begin to ask, "What makes for a good society?" They begin to think
about society in a very theoretical way, stepping back from their own society and
considering the rights and values that a society ought to uphold.
 They then evaluate existing societies in terms of these prior considerations. They
are said to take a "prior-to-society" perspective.
 Stage 5 respondents basically believe that a good society is best conceived as a
social contract into which people freely enter to work toward the benefit of all.
 They recognize that different social groups within a society will have different
values, but they believe that all rational people would agree on two points. First they
would all want certain basic rights, such as liberty and life, to be protected second,
they would want some democratic procedures for changing unfair law and for
improving society.
 Respondents make it clear that they do not generally favor breaking laws; laws are
social contracts that we agree to uphold until we can change them by democratic
means.
 Nevertheless, the wife’s right to live is a moral right that must be protected.
Stage 6
One’s decisions are based on universally acceptable Principles.
Stage 6 - defines the principles by which we achieve justice.
 Kohlberg's conception of justice follows that of the philosophers Kant and Rawls, as
well as great moral leaders such as Gandhi and Martin Luther King. According to
these people, the principles of justice require us to treat the claims of all parties in
an impartial manner, respecting the basic dignity, of all people as individuals.
 The principles of justice are therefore universal; they apply to all. Thus, for example,
we would not vote for a law that aids some people but hurts others.
 The principles of justice guide us toward decisions based on an equal respect for all.
 He believes that stage 6 has a clearer and broader conception of universal principles
(which include justice as well as individual rights), but feels that his interview fails
to draw out this broader understanding.

The post conventional level as represented in stages five and six is commonly referred to as
the principled level, as it reflects the need for a principled conscience and is rarely
achieved. Those functioning at this highest stage demonstrate the greatest ability for
complex thought, understanding of interrelated abstract concepts, and moral judgment as
exhibited by exercising moral action and behaviors. Individuals functioning at these stages
of moral development demonstrate awareness of the need to circumvent one’s personal
needs for the greater good of society and moral judgments are based on the rightness of the
action, not the end consequences.
Therefore,
 Decisions are based on evaluation of morality or rights. Includes evaluation of what
society ought to value and they are Concerned with the existing social contract.
 Decisions are based on universal principles of justice. Requires objective evaluation

from all perspectives. Concerned with acting morally; might involve civil disobedience.
According to (Rest et al). Kohlberg’s seminal theory was heavily focused on moral
judgment to the elimination of other factors that influence ethical decision-making.
Rest synthesized diverse views of previous paradigms and addressed the Kohlbergian
deficiencies by designing a model consisting of four components:
 sensitivity,
 moral judgment,
 moral motivation, and
 moral character
(Narvaez & Rest, 1995; Narvaez, 2005);
Moral judgment is the reasoning ability to determine which actions are morally right or
wrong, influences whether one chooses an ethical decision.
Moral sensitivity is the ability to contextualize the situation, empathize, comprehend and
construct alternative solutions intuitively. Moral sensitivity is thought to precede judgment
logically that is, one must assess alternative possibilities for action or consider how certain
behaviors may elicit certain outcomes and their impact on others before one can make a
judgment (Rest et al., 1999a).
Moral motivation involves the prioritization of competing values and “committing to a
moral course of action” as well as “taking responsibility for the outcome” (Walker, 2002).
Finally, moral character is best described as the ability to carry out or implement an action
once decided.
It is “demonstrations of character” (e.g., fortitude and courage) that “propels the action”
from a thought to fruition.
Another distinction from Kohlberg’s original theory is the notion that complex human
thought is a product of collecting information, processing, and reacting to feedback loops.
This process allows one to reconstruct the knowledge attained and apply that knowledge in
other circumstances. While retaining a hierarchical approach, Rest refuted Kohlberg’s hard
stage philosophy and asserted that “individuals may evidence a cognitive structure at
different levels” simultaneously. As such, Rest refined the stage model by replacing it with

the concept of schemas (Narvaez & Bock, 2002). Kohlberg’s post conventional,
conventional, and preconvention stages are referred to by Neo-Kohlbergians as post
conventional, maintaining norms, and personal interest schemas, respectively. training
ETHICS AND THE LAW
Business Ethics Restricted to Following the Law. In business ethics, moral obligations in
business are restricted to what the law requires. The most universal aspects of Western
morality have already been put into our legal system, such laws against killing, stealing,
fraud, harassment, or reckless endangerment. Moral principles beyond what the law
requires or legal principles appear to be optional since philosopher’s dispute about their
validity and society wavers about its acceptance.
For any specific issue under consideration, like determining what counts as responsible
marketing or adequate privacy in the workplace, there are opposing positions on the legal
moral obligations. It is, therefore, unreasonable to expect businesses to perform duties
about which there is so much disagreement and which appear to be optional.
in Muslim countries that are not necessarily ruled by Islamic law, there is a strong source
of external morality that would be binding on Muslim businesses apart from what their
laws would require.
Even within Christianity, the diversity of denominations and beliefs prevents it from being
a homogeneous source of Christian values. In short, without a widely recognized system of
ethics that is external to the law, supra-legal moral obligations in our society appear to be
optional; and, it is unreasonable to expect business people to be obligated to principles
which appear to be optional.
In a culturally pluralistic society, the only business-related moral obligations that are
majority-endorsed by our national social group are those obligations that are already
contained in the law. These include a range of guidelines for honesty in advertising,
product safety, safe working conditions, and fair hiring and firing practices. In fact, the
unifying moral force of businesses within our diverse society is the law itself.
And, clearly, the obligations within those subgroups are not binding on those outside the
subgroups. If a business does not belong to any subgroup, then its only moral obligations
will be those within the context of society at large, and these obligations are in the law.
Strictly following this legal approach to business ethics may indeed prompt businesses to
do the right thing, as prescribed by law. Nevertheless, there are two key problems with
restricting morality solely to what the law requires. First, even in the best legal context, the
law will lag behind our moral condemnation of certain unscrupulous, yet legal business
practices. For example, in the past, drug companies could make exaggerated claims about
the miraculous curative properties of their products.
Now government regulations prohibit any exaggerated claims. Thus, prior to the enactment
of a law, there will be a period of time when a business practice will be deemed immoral,

yet the practice will be legal. This would be a continuing problem since changes in
products, technology, and marketing strategies would soon present new questionable
practices that would not be addressed by existing legislation.
A second problem with the law-based approach is that, at best, it applies only to countries
whose business-related laws are morally reliable. The situation may be different for some
developing countries with less sophisticated laws and regulatory agencies.
TRADITIONAL APPROACHES TO BUSINESS ETHICS
Traditional ethical theories
Traditional ethical theories generally offer a certain rule or principle which one can apply
to any given situation - hence they are absolutist in intention. These theories are normative
because they start with an assumption about the nature of the world, and more specific
assumptions about the nature of human beings. Consequently, the degree to which we can
accept the theories and the outcome of their application to particular business situations
depends chiefly on the degree to which we share their underlying assumptions.
We have theories that base the moral judgment on the outcomes of a certain action. If these
outcomes are desirable then the action in question is morally right; if the outcomes of the
action are not desirable, the action is morally wrong. The moral judgment in these
consequentialist theories is thus based on the intended outcomes, the aims, or the goals of
a certain action. Therefore, consequentialist ethics is often also referred to by the term
teleological, based on the Greek word for 'goal'.
On the other hand, we have those theories that base the moral judgments on the underlying
principles of the decision-maker's motivation, an action is right or wrong, these theories
suggest, not because we like the consequences they produce but because the underlying
principles are morally right.
These non-consequentiality approaches are quite closely linked to one’s thinking and start from
reasoning about the individual's rights and duties. These philosophic theories, also called deontological
(based on the Greek word for 'duty'), look at the desirability of principles, and based on these
principles, deduce a 'duty' to act accordingly in a given situation, regardless of the desirability of the
consequences.
Rights and
Egoism Utilitarianism Ethics of duties
justice
Jeremy
John Locke, John
Contributors Adam Smith Bentham, John Immanuel Kant.
Rawls
Stuart Mill
Focus Individual Collective Duties Rights

desires or

interests welfare
Maximization of
Act/rule Categorical Respect for
Rules desires/self
utilitarianism imperative human beings
interest
Man is
controlled by Man is a being
Man as an actor
Concept of avoidance of Man is a rational that is
with limited
human beings pain and gain of moral actor distinguished by
objectives
pleasure - dignity
('hedonist').
Non- Non-
Type Consequentialist Consequentialist
consequentialist consequentialist
Consequentialist theories
These hold that the moral worth of an action or practice is determined solely by the
consequences of the action or practice that stems from rightness or wrongness of actions.
So what makes the action right or wrong is the good or evil that is produced by the act, not
the act in its self.
Here we shall look at two main consequentiality theories:
 Egoism
 Utilitarianism
Whilst both of these theories address right and wrong according to the outcomes of a
decision, we shall see that they address those outcomes in different ways - egoism by
focusing on the outcomes for the decision maker, utilitarianism by focusing on the wider
social outcomes within a community.
Ethical dilemma
An engineering firm has won an award to build a bridge to specification for a set price. Due to
mis-estimating costs, if the firm builds the bridge as specified the company will go bankrupt.
However, if the firm uses inferior materials and reduces the safety factor in the bridge design,
it can make a profit.
Using each ethical theory, advise the firm on the appropriate action to take and give reasons
to justify your answers.

Egoism
Egoism is one of the oldest philosophical ideas, and it was already well known and
discussed by ancient Greek philosophers such as Plato. In the last three centuries, it has
been quite influential in modern economics, particularly in relation to Adam Smith's (1723-
1790) ideas about the design of liberalist economics. Egoism can be defined as follows:
Following the theory of egoism, an action is morally right if the decision maker freely
decides in order to pursue either their (short term) desires or their (long term) interests.
The justification for egoism lies in the underlying concept of man: as man has only limited
insight into the consequences of his actions, the only suitable strategy to achieve a good life
is to pursue his own desires or interests.
Adam Smith (1793) argued that in the economic system, this pursuit of individual self-
interest was acceptable because it produced a morally desirable outcome for society
through the 'invisible hand' of the marketplace. Smith's argument may thus be summarized
as saying that one is likely to find a moral outcome as the end-product of a system based on
free competition and good information.
For example, if a producer makes and sells shoddy or faulty products, then consumers may
suffer in the short term as the result of the lack of fitness of the products that they have
bought. However, in the longer run, providing consumers know about alternative choices,
the producer's trade will suffer as consumers turn to other producers. Hence, the producer
will avoid producing shoddy goods for their own self-interest, thus producing a situation
that is beneficial to all. Because of his aim to produce wider social benefits, some have
likened Smith's theory to 'egoist practices for utilitarian results' (Beauchamp & Bowie,
1997).
For example, if a producer makes and sells shoddy or faulty products, then consumers may
suffer in the short term as the result of the lack of fitness of the products that they have
bought. However, in the longer run, providing consumers know about alternative choices,
the producer's trade will suffer as consumers turn to other producers. Hence, the producer
will avoid producing shoddy goods for their own self-interest, thus producing a situation
that is beneficial to all. Because of his aim to produce wider social benefits, some have
likened Smith's theory to 'egoist practices for utilitarian results' (Beauchamp & Bowie,
1997).
It is important to distinguish egoism based on desire from selfishness. Whereas the egoist
can be moved by pity for others in seeking to remove his own distress caused by their
plight, the selfish person is insensitive to the other.
Within moral philosophy, an important criticism of egoism based on desire is that it

renders patently different approaches to life as being equivalent; thus in this view, the life
of the student, who just gets drunk every night in the Student's Union is as admirable as the
student who works hard for a first class degree, if both followed their desire.

Therefore, within this school of philosophy, an egoism based on the pursuit of interests is
the ultimate rendering of this concept (Graham, 1990). The idea of interests based on the
pursuit of one's long-term well-being enables one to distinguish between the life of the
hard-drinking student and that of the hard-working student. In this formulation, a gap
opens up between desire (or longing) and what is in one's ultimate interests, such that one
can say that it is not in the interest of the drinking student to give in to immediate desires.
An egoism based on interests therefore approaches the idea of objective value - as in, that
one way of acting is objectively better or 'more ethical' than another.
Utilitarianism
The philosophy of utilitarianism has been linked to the names of the British philosophers
and economists Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873) and has
been influential in modern economics in general. The basic principle of utilitarianism could
be defined as follows:
Utilitarianism as a consequentiality theory as it has application to business decisions holds

that whether an action is right or wrong depends on the good (pleasure) or bad (pain)
consequences produced for everyone affected by the action. Utilitarian theory is thus
universal or comprehensive and considers the consequences of all the parties affected by
the act.
According to utilitarianism, an action is morally right if it results in the greatest amount of

good for the greatest amount of people affected by the action.
This principle, also called the “greatest happiness principle” is the ultimate
consequentiality principle as it focuses solely on the consequences of an action and weighs
the good results against the bad results and finally encourages the action which results in
the greatest amount of good for all people involved.
Utilitarianism according to Jeremy Bentham and John Stuart Mill explains the idea that the
moral worth of an action is determined solely by its utility in providing happiness or
pleasure as summed among all conscious beings. It is thus a form of consequentialism
meaning that the moral worth of an action is determined by its outcome. As such, it moves
beyond the scope of one's own interests and takes into account the interests of others.
Unlike egoism, it does not only look at each individual involved and ask whether their
individual desires and interests are met, but it focuses on the collective welfare that is
produced by a certain decision.
The underlying idea is the notion of utility (satisfaction), which Bentham sees as the
ultimate goal in life. Man’s purpose in life is to maximize pleasure and minimize pain.
In this pleasure-seeking interpretation of utilitarianism, utility is measured in terms of

pleasure and pain. Other interpretations of utility look at happiness and unhappiness. while

others take a strongly extended view that includes into the equation not only pleasure or
happiness but ultimately all fundamentally valuable human goods (the 'ideal' view). These
goods then would typically include aspects such as friendship, love, trust, etc.
Utilitarianism has been very powerful since it puts at the centre of the moral decision a
variable which is very commonly used in economics as a parameter which measures the
(economic) value of actions: “utility”. Ultimately utilitarianism then comes close to what we
know as cost-benefit analysis.
Steps of making a Utilitarian decision:
a) Determining the alternative actions that are available in any specific decision
situation
b) Estimating the costs and benefits that a given action would produce for each and
every person affected by the action.
c) Choosing the alternative that produces the greatest sum of utility or the least
amount of disutility.
STRENGTHS
Utilitarianism offers a relatively straightforward method for deciding the morally right
course of action for any particular situation we may find ourselves in. To discover what we
ought to do in any situation, we first identify the various courses of action that we could
perform. Second, we determine all of the foreseeable benefits and harms that would result
from each course of action for everyone affected by the action. And third, we choose the
course of action that provides the greatest benefits after the costs have been taken into
account.
Utilitarianism promotes human welfare by minimizing harm and maximizing benefits as a

whole. It involves the consideration of alternatives, as an action or practice is judged to be
correct if it leads to the greatest possible balance of good consequences or the least
possible balance of bad consequences for everyone affected by the consequences or
practice when compared with alternative actions or practices that are available. E.g
keeping a promise is in the good of all parties than the consequences of breaking the
promises.
Utilitarianism is based on the general principle that morality must depend on balancing the
beneficial and harmful consequences of our conduct.
 The morally correct action is the one that maximizes net social benefits, where net
social benefits equals social benefits minus social costs.
 Focus: the ends (results) of an action
In assessing the consequences of actions, Utilitarianism relies upon some theory of

intrinsic/essential value: something is held to be good in it, apart from further
consequences, and all other values are believed to derive their worth from their relation to
this intrinsic good as a means to an end.

Utilitarian society goes not just to the issue of personal actions and social policy, but also to
the very nature of society. This was postulated by Plato’s question: How to build the ideal
society? Utilitarian theory is applied not just to the conditions of captivity, but also to that
of employment, goods and service, and the distribution of wealth. Utilitarianism is about
maximizing the good.
Utilitarianism has been very powerful since it puts at the centre of the moral decision a
variable which is very commonly used in economics as a parameter which measures the
(economic) value of actions ( social benefits/good vs. social cost/harm ): 'utility'.
Regardless of whether one accepts that utility really is quantifiable, it comes as no surprise
to find that utilitarian analysis is highly compatible with the quantitative, mathematical
methodology of economics. The Utilitarian theory is thus universal or comprehensive and
considers the consequences of all the parties affected by the act.
WEAKNESSES / CRTICISMS OF THE THEORY
 Utilitarianism favors majority interests at the expenses of minority or self needs.

Distribution of utility. It would appear that by assessing the greatest good for the
greatest number, the interests of minorities are overlooked. In our example, a minority
of children might suffer so that the majority might benefit from greater utility.
It only considers how much total utility is produced by an action, and fails to take into
account how that utility is distributed. A sound morality cares not only about the size of
the benefits pie but also how it is divided among persons.
 Subjectivity. Clearly when using this theory you have to think rather creatively, and
assessing such consequences as pleasure or pain might depend heavily on the
subjective perspective of the person that carries out the analysis;
 Problems of quantification. Similarly, it is quite difficult to assign costs and benefits to
every situation. In modern settings, costs and benefits are pegged to the price based as
opposed to a numerical scale proposed by the scholars Jeremy Bentham.
This might be quite easy in the example for the persons directly involved with the
transaction but it is certainly difficult to do so for the children involved, since their
pleasure and pain is not quantifiable. Especially in these cases, it might be quite
difficult to weigh pleasure against pain: is losing a good contract really comparable
to forcing children into labor? Similarly, under utilitarianism, health and safety
issues in the firm require 'values' of life and death to be quantified and calculated,
without the possibility of acknowledging that they might have an intrinsic worth
beyond calculation.
 Most utilitarian theories deal with producing the greatest amount of good for the
greatest number of people. Negative utilitarianism (NU) requires us to promote the
least amount of evil or harm, or to prevent the greatest amount of suffering for the
greatest number.
 Utilitarianism is criticized for looking only at the results of actions, not at the desires or
intentions that motivate them, which many consider important, too. An action intended
to cause harm but that unintentionally causes good would be judged equal to the good

result of an action done with the best intentions. Utilitarianism applies not only to
results but also to desires and dispositions, praise and blame, rules, institutions and
punishment.
 Furthermore, many utilitarians view morality as a personal guide rather than a means
to judge the actions of other people, or actions already performed: morality is
something you look at before deciding what to do. In this sense, intentions are all that
matter, because the consequences cannot be known with certainty until the decision is
made.
 Utilitarianism argues that justification of slavery, torture or mass murder would require
unrealistically large benefits to outweigh the direct and extreme suffering to victims.
Utilitarianism would also require the indirect impact of social acceptance of inhumane
policies to be taken into consideration, and general anxiety and fear could increase for
all if human rights are commonly ignored which is not a universal principle.
 Act and rule utilitarianism differ in how they treat human rights themselves. Under rule
utilitarianism, a human right can easily be considered a moral rule. Act utilitarianism,
on the other hand, do not accept human rights as moral principles in and of themselves,
but that does not mean that they reject them altogether: first, most act utilitarian, would
agree that acts such as enslavement during the colonial days and genocide in countries
like Rwanda always caused great unhappiness and very little happiness; secondly
human rights could be considered rules of thumb so that, although torture might be
acceptable under some circumstances, as a rule it is immoral; and, finally, act utilitarian
often support human rights in a legal sense because utilitarianism support laws that
cause more good than harm.
 Another criticism of utilitarianism is that it is not proven, either by science or by logic,
to be the correct ethical theory. Supporters claim that this is common to all ethical
schools, and indeed the system of logic itself, and will always remain so unless the
problem of the regress argument, or at least the is-ought problem, is satisfactorily
resolved. It might instead be argued that almost all political arguments about a future
society use an unspoken utilitarian principle, all sides claiming that their proposed
solution is the one that increases human happiness the most.
 Mill's argument for utilitarianism holds that pleasure is the only thing desired and that,
therefore, this is like saying that things visible are things seen, or that the only things
audible are things heard. A thing is "visible" if it can be seen and "desirable" if it ought
to be desired. Thus the word "desirable" presupposes an ethical theory: we cannot infer
what is desirable from what is desired.
Bentham's views (or similar views) of utility, is criticized on ground that different things
make different people happy, and that what promotes happiness changes over time.
Non-consequentiality theories
There are the two main types of non-consequentialist ethical theories that have been
traditionally applied to business ethics:
 Ethics of duties (Immanuel Kant)

 Ethics of rights and justice (John Locke, John Rawls)
These two approaches are very similar, stemming from assumptions about basic universal
principles of right and wrong. However, whilst rights based theories tend to start by
assigning a right to one party and then advocating a corresponding duty on another party
to protect that right, ethics of duties begin with the assignation of the duty to act in a
certain way.
Ethics of duties (Theory of Duty (deontology) by Kant Immanuel (KANTIAN

THEORY)
Its main contributor, the German philosopher Immanuel Kant (1724-1804), thought that
morality and the decision about right and wrong action was not dependent on a particular
situation, but alone on the consequences of the action. For Kant, morality was a question of
certain eternal, abstract, and unchangeable principles - a set of a priori moral laws - that
humans should apply to all ethical problems.
As a key Enlightenment thinker, Kant was convinced that human beings do not need God,
the church, or some other superior authority to identify principles for ethical behavior. He
saw humans as rational actors who could decide these principles for themselves. Hence,
humans could therefore also be regarded as independent moral actors who made their own
rational decisions regarding right and wrong.
Kant subsequently developed a theoretical framework through which these principles

could be derived, called the”categorical imperative’'. By this he meant that this theoretical
framework should be applied to every moral issue regardless of who is involved, who
benefits, and who is harmed by the principles once they have been applied in specific
situations.
The categorical imperative consists of three parts, which Kant puts forward as follows;
Maxim 1:
Act only according to that maxim /proverb by which you can, at the same time will that it
should become a universal law.
Maxim one checks if the action could be performed by everyone and reflects the aspect of
consistency, as in an action can only be right if everyone could follow the same underlying
principle. So, for example, murder is an immoral action because if we allowed everybody to
murder there would be no possibility of human life on earth. Lying is immoral, because if
everybody were allowed to lie, the entire notion of 'truth' would be impossible and an
organized and stable human civilization would not be imaginable.
Maxim 2:

Act so that you treat humanity, whether in your own person or in that of another, always as
an end and never as a means only.
This focuses on Kant's view that humans deserve respect as autonomous, rational actors,
and that this human dignity should never be ignored. We all use people as means, as soon
as we employ them or pay them to provide us with goods or services. However, this does
not mean we should only treat them as means to achieve what we want and just forget
about their own needs and goals in life, and their expectations to make their own choices.
Maxim 3:
Act only so that the will through its maxims could regard itself at the same time as
universally lawgiving.
The third maxim scrutinizes the element of universality. I might come to the conclusion
that a certain principle could be followed consistently by every human being; I could also
come to the conclusion that in following that principle, I respect human dignity and not just
'use' people as a means only.
According to Kant, these three maxims can be used as tests for every possible action, and
an action is to be regarded as morally right if it 'survives' all three tests. This suggests that
morality is characterized by three important elements, each of which is tested by one of
these maxims.
Criticisms
Undervaluing outcomes’ obviously one of these problems is that there is rather little
consideration of the outcomes of one's actions in ethics of duty. Although Kant would argue
that you can consider consequences providing you would agree that everyone should when
faced with similar situations, it gives you no real way of assessing these outcomes, and they
do not form a fundamental part of the theory itself.
Optimism; Kant's theory is quite optimistic: his view of man as a rational actor who acts
consequently according to self-imposed duties seems more of an ideal than a reality with
regard to business actors. In contrast, the strength of egoism is that it is a concept of
humans that is generally quite well confirmed by the conventional pattern of business
behavior.
whilst the basic idea of ethics of duty is quite simple - basically, is this action right, and is it
my duty to do it - specific formulations such as Kant's categorical imperative can be quite
complicated to apply. His principles-based way of evaluating a decision requires a certain
amount of generalization and it is this level of intellectual scrutiny that one cannot take for
granted in each and every case.
Furthermore, Kant's theory is quite optimistic: his view of man as a rational actor who acts
consequently according to self-imposed duties seems more of an ideal than a reality with

regard to business actors. In contrast, the strength of egoism is that it is a concept of

humans that is generally quite well confirmed by the conventional pattern of business
behavior.
Kantian virtue is a struggle against emotions. Whether one thinks the emotions should be
subjugated or eliminated, for Kant moral worth comes only from the duty of motive, a
motive that struggles against inclination. This is quite different from the Aristotelian
picture of harmony between reason and desire.
Additionally, for Kant there is no such thing as weakness of will, understood in the
Aristotelian sense of the distinction between continence and incontinence. Kant
concentrates on strength of will and failure to do so is self-deception.
Finally, Kantians need to give an account of the relationship between virtue as occurring in
the empirical world and Kant’s remarks about moral worth in the numeral world (remarks
that can be interpreted as creating a contradiction between ideas in the Groundwork and in
other works).
Ethics of rights and justice
The notion of rights goes back to an entire philosophical school initially linked to the
British philosopher John Locke (1632-1714). He conceptualized the notion of “natural
rights”, or moral claims, that human were entitled to, and which should be respected and
protected (at that time, primarily by the state). Among the most important rights conceived
by Locke and subsequent rights theorists were rights to life, freedom, and property.
These have since been extended to include rights to freedom of speech, conscience,
consent, privacy, and the entitlement to a fair legal process among others.
In terms of an ethical theory, we could define rights along the following lines:
Natural rights are certain basic, important, unalienable entitlements that should be
respected and protected in every single action.
Justice can be defined as the simultaneously fair treatment of individuals in a given

situation with the result that everybody gets what they deserve.
The general significance of the notion of rights in terms of an ethical theory lies in the fact
that these rights typically result in the duty of other actors to respect them.
In this aspect, rights are sometimes seen as related to duties since the rights of one person
can result in a corresponding duty for other persons to respect, protect, or facilitate these
rights. One’s right to property imposes a duty on others not to interfere with his/her
property or take it away. One’s right to privacy imposes a duty on others to refrain from
gathering personal information about his/her private life without his/ her consent. Rights
and duties are therefore frequently seen as two sides of the same coin.

This link to corresponding duties makes the theory of rights similar to Kant's approach.
The main difference is that it does not rely on a rather complex process of determining the
duties by applying the categorical imperative. Rather, the notion of rights is based on a
certain obvious claim about human nature that rests mostly on various philosophical
approaches of the Enlightenment, often backed up by certain religious views, such as the
approach of Catholic social thought.
Natural rights, or human rights, as they are referred to mostly today, are based on a certain
consensus of all human beings about the nature of human dignity.
Despite its lack of a complicated theoretical deduction - or maybe even just because of it’s
rather simple and credible viewpoint.
The rights approach has been very powerful throughout history and has substantially
shaped the constitutions of many modern states including Uganda. This includes the
Declaration of the Rights of Man that was influential during the period of the French
Revolution (1789), and the American Constitution, which is largely based on notions of
rights. These ideas have also led to the United Nations Declaration of Human Rights, issued
in 1948, which has been a powerful standard of worldwide enforcement of various rights.
Today, basic human rights would include a right to life, liberty, justice, education, fair trial,
fair wages, freedom of belief, association, and expression, to name just a few. It is this
background that makes the entire notion of human rights one of the most common and
important theoretical approaches to business ethics on a practical level. Corporations,
especially multinationals, are increasingly judged with regard to their attitude to human
rights and in how far they respect and protect them.
The main criticisms/drawbacks of traditional ethical theories are:
Too abstract; the traditional ethical theories are too theoretical and impractical for the
practical day-to-day concerns of managers. In real life, business managers are unlikely to
apply theoretical principles derived from long-dead philosophers when dealing with the
concrete problems of business. The business context has its own values which have
changed over time, structures and practices that need to be taken into account (Furman
1990).
Too specific; Kaler (1999) argues that each theory tends to focus on one aspect of morality
at the cost of all the rest of morality. Why choose consequences, duties, or rights when all
are important?
Too objective and selective. Parker (1998) suggests that ethical theories attempt to
occupy a complex high ground, such that those specialist ethicists and philosophers who
know and understand the theories can pronounce on the right and wrong of other people
without any subjective experience of the situation they are faced with.

Too impersonal; by focusing on theoretical principles, traditional ethical theories do not

take account of the personal bonds and relationships that shape our thoughts and feelings
about right and wrong (Gilligan 1982).
CONTEMPORARY ETHICAL THEORIES
Contemporary ethical theories are those that have either been developed or brought to
prominence in the business ethics field over the past decade or so. As such they much less
commonly appear in business ethics texts, yet we would suggest that they offer an
important alternative perspective which should not be ignored, and which, we would
suspect, may become increasingly more influential in the business ethics literature. There
are four main contemporary ethical theories:
 Virtue ethics.
 Feminist ethics.
 Discourse ethics.
 Postmodern ethics.
Virtue ethics
Virtues are acquired human qualities, the excellence of characters which enable a person to
achieve a good life according to Aristotle.
Or they can be defined as simply behaviors or attitudes that show high moral standard.
Virtues are a set of acquired traits of character that enable a person to lead a good life.
Virtues can be differentiated into;
 intellectual virtues – “wisdom” being the most prominent one, and

 Moral virtues, which comprise a long list of possible characteristics such as honesty,
courage, friendship, mercy, loyalty, modesty, patience, etc.
All these virtues are manifested in actions that are a habitual pattern of behavior of the
virtuous person rather than just occurring once, or in one-off decisions. As these traits are
not ours by birth, we acquire them by learning, and most notably in business, by being in
relationships with others in a community of practice (MacIntyre, 1984).
Much attention in recent years has focused on approaches that start from a different
perspective: rather than checking every single action according to its outcomes, or its
underlying principles, these approaches look to the character of the decision maker
(Nielsen 2006). Such approaches have actually drawn from one of the earliest ethical
theories, that of virtue ethics, to develop an alternative perspective on business ethics that
marks a departure from the traditional rule-based theories.
In virtue ethics, “good actions come from good persons”. We could therefore define it along
the following lines:

Virtue ethics contends that morally correct actions are those undertaken by actors with
virtuous characters. Therefore, the formation of a virtuous character is the first step
towards morally correct behavior.
Central to the ethics of virtue is the notion of a “good life”. For Aristotle, one of the original
proponents of virtue ethics, this consists of happiness, but not in a limited pleasure-
seeking, pleasure-oriented sense, but in a broader sense. This most notably includes
virtuous behavior as an integral part of the good life: a happy businessperson would not
only be one who finally makes a lot of money, but one who does so by at the same time
savoring the pleasures of a virtuous manner of achieving their success. In a business
context, the “good life”, means far more than being a profitable company.
Virtue ethics takes a much more holistic view by also looking at the way this profit is
achieved, and most notably, by claiming, that economic success is just one part of the good
business life - with satisfaction of employees, good relations among all members of the
company, and harmonious relations with all stakeholders being equally important (Collier
1995).
It doesn't take long to see what the main drawback of virtue ethics is: how do we
determine which community ideal of good practice to consult? And, in the absence of a
clear code of conduct from our relevant communities, how do we translate ideas of
virtuous traits into ethical action? Still, the relevance of virtue ethics for business ethics is
that it reminds us that right and wrong cannot simply be resolved by applying a specific
rule or principle, but that we need to cultivate our knowledge and judgment on ethical
matters over time through experience and participation (Nielsen 2006).
Feminist ethics
Feminist approaches to business ethics start from the assumption that men and women
have fairly different attitudes towards organizing social life, with significant impact on the
way ethical conflicts are handled.
Whilst male approaches would focus on “fair” results, feminist perspectives stress social
processes and particularly aim at the achievement of harmony, empathy, and integration
with regard to ethical issues. The main goal is to avoid harm and maintain healthy
relationships.
In addressing ethical problems, traditional ethical theories have looked for rules and
principles to be applied in a fair, objective, and consistent way. This approach has been
almost exclusively established and promulgated by male philosophers and thinkers such as
Kant, Locke, Bentham, Smith, and Mill. The 'ethics of rights', as this male view sometimes is
called (Maier 1997), tries to establish legitimate grounds for claims and interests of
individuals in situations of social conflicts.
Feminist ethics, on the other hand has a different approach that sees the individual deeply
embedded in a network of interpersonal relations. Consequently, responsibility for the
members of this network and maintenance of connectedness, rather than allegiance to

theoretical moral principles is the predominant concern of feminist ethics. This approach,
often therefore called an “ethics of care”, consequently results in significant differences in
the view of ethical issues.
Following this description, we might suggest the following definition:
Feminist ethics is an approach that prioritizes empathy, harmonious and healthy social
relationships, care for one another, and avoidance of harm above theoretical principles.
Moral problems are conflicts of responsibilities in relationships rather than conflicts of

rights between individuals and therefore can only be solved by personal, subjective
assessment that particularly stresses the importance of emotion, intuition, and feeling.
[Students consider the reactions to a break-up in a relationship between a male and female
student. Also ponder the reactions of their peers]
Contrasting gender-based view of business ethics
'Ethics of rights'(male 'Ethics of care and

approach) relationships' (feminist
ethics)
View of humans Autonomous, separate, Interdependent actors

independent. Bearer of within a social web
a function in the group
Moral goal Fairness and Avoid harm.

impartiality.
Maintenance of rules Maintenance of
relationships.
Moral problem Conflict of rights Conflict of

between individuals responsibilities in
network relationships.
Values Rights, duties, fairness, Harmony, empathy,

due process, equal community, caring,
protection responsiveness,
integration.
Focus Results Processes.
Driving social Competition, winning Cooperation,

compromise
force

It is important to remember though that as an ethical theory, feminism does not argue that
women are the best ethical actors. Feminism rather proposes a particular attitude toward
ethical conflicts that is more within the framework of what women allegedly would do by
intuition/perception anyway. Consequently, an organization with feminist values and
approaches is a business where men and women alike follow these principles and all
employees regardless of their gender are encouraged to embrace a 'feminine' approach to
ethical issues.
Ultimately then feminist ethics is not so much about stressing a certain gender orientation
rather than highlighting the importance of responsible establishment and maintenance of
relations.
Discourse ethics
All the theoretical approaches we have discussed so far start from a certain perspective on
humans, on the values or goals governing their decisions, and a few other assumptions that
in essence are all normative in nature. Normative, in this context means prescriptions of
right and wrong action.
The question rises if this starting point is in fact a very useful way to solve ethical conflicts
in business. After all, we cannot take it for granted in a given situation that everybody
shares, for instance, the notion of humans being pleasure-seeking or of rights or feminist
values being the most appropriate ones to address ethical problems in business. This is
already problematic in a group of relatively homogeneous people;
The philosophical underpinning of this theoretical approach is the argument that norms
ultimately cannot be justified by rational arguments, but that they have to be generated and
applied to solve ethical conflicts on a day-to-day basis (Preuss 1999).
Steinmann and Lohr (1994) as the main proponents of a discourse approach to business
ethics argue that ethical reflection has to start from real-life experiences (rather than belief
systems, which could be too diverse). They contend that the ultimate goal of ethical issues
in business should be the peaceful settlement of conflicts.
With this goal in mind, different parties in a conflict should sit together and engage in a
discourse about the settlement of the conflict, and ultimately provide a solution that is
acceptable to all. This 'ideal discourse', as it is usually called, is more than an occasional
chat or business meeting, it particularly has to answer certain philosophical criteria such as
impartiality, non-persuasiveness, non-coercion and expertise of the participants.
This would particularly include the injunction that those who are more powerful in a
certain situation refrain from imposing their values on others, and using their power to
solve the ethical conflict according to their own belief systems.
Such a discourse then would lead to norms for a specific situation that are an expression of
the rational consensus of all affected persons or represented parties. In establishing a
rational 'ideal discourse' about specific problems, this approach is thus supposed to be
norm generating.

Given this brief outline, we might usefully posit the following basic definition:
Discourse ethics aims to solve ethical conflicts by providing a process of norm generation
through rational reflection on the real life experience of all relevant participants.
Discourse ethics, then, is more a recipe for practical conflict solution than an ethical theory
comparable to those discussed above. In simple terms, the only condition for it to work is
the assumption that all rational human beings share the experience, and that the norm of
peaceful resolution of conflict is the best way to organize social interaction. [Students think
about the Middle East conflict or the war on terror].
Postmodern perspectives on business ethics
The postmodern school of thought fundamentally questions the link between rationality
and morality that is inherent in all traditional ethical theories. These traditional theories
have their origins in modernism, which emerged roughly during the eighteenth century
Enlightenment era. 'Modern' thinkers strove for the rational, scientific explanation of the
world and aimed for comprehensive, inclusive, theoretically coherent theories of
explaining nature, man, and society. In the area of the social sciences, one of the results of
this was the development of various theories commonly in the form of certain '-isms', such
as liberalism, communism, socialism, rationalism, capitalism, etc. Postmodern thinkers
contend that these comprehensive theories, these 'grand narratives' of society (Lyotard
1984), are too ambitious, optimistic, and reductionist, ultimately failing to explain the
complex reality of human existence.
While postmodernism tends to embrace a whole range of theoretical propositions and

arguments, postmodern thinkers have been particularly influential in ethics, since they
identify the specific danger of rational approaches to morality. Zygmunt Bauman (1993),
one of the best-known proponents of postmodern ethics, argues that by codifying morality
within specific rules and codes of behavior (as for example, exemplified in bureaucratic
organizations), rational approaches deny the real source of morality, which is rooted in a
'moral impulse' towards others.
This is a subjective, emotional conviction that humans have about right and wrong, based
on their experiences, sentiments, and instincts. Moral judgment then is a gut feeling more
than anything else, but this is inevitably nullified when people enter organizations and
become distanced from the people who are actually going to experience the consequences
of their decisions, such as consumers, investors, suppliers and others. These ideas lead us
to the following definition:
Postmodern ethics is an approach that locates morality beyond the sphere of rationality in
an emotional 'moral impulse' towards others. It encourages individual actors to question
everyday practices and rules, and to listen to and follow their emotions, inner convictions,
and 'gut feelings' about what they think is right and wrong in a particular situation.
BUSINESS ETHICS & CAPITALISM

What is Capitalism?
The word capitalism is now quite commonly used to describe the social system in which we
now live. It is also often assumed that it has existed, if not forever, then for most of human
history.
Capitalism is considered a socio-economic system as it is not just a way of earning money

and making a living, but is also a way of thinking about social organization. Capitalism is
based on the idea of individualism and that individuals have the right to economic freedom.
Capitalism (free market or free enterprise economy) is defined as "an economic system” in
which all or most of the means of production and distribution, as land, factories,
communication, and transportation systems, are privately owned and operated by a small
minority of people in a relatively competitive environment through the investment of
capital to produce profits where the majority of people(working class) must sell their
ability to work in return for a wage or salary.
Private ownership of the businesses of a society with the freedom of private owners to use,
buy and sell their property or services on the market at voluntarily agreed prices and
terms, with only minimal interference with such transactions by the state or other
authoritative third parties.
Capitalism has been characterized by a tendency toward the concentration of wealth, the
growth of large corporations, etc. that has led to economic inequality, which has been dealt
with usually by increased government action and control."
Capitalism in the business ethics perspective is defined as the social systems based upon
the principle of individual rights and liberties.eg putting a factory in a highly populated
area. This raises a controversy when it comes to the spill over to the society and the
question of morality sets in.
The foundation of capitalism is the philosophy of “reason, egoism and individual rights”.
Capitalist Ideology
Capitalism focuses on the person as an individual rather than working for the good of
society at large, individuals in capitalistic economies work for themselves, and often for
their families as well. People are able to own personal property, and to keep what they
earn.
Ideally, capitalism rewards a person fairly for his work. Because few things work out
ideally, this of course does not always happen – not all jobs pay well and not all bosses are
fair and honest. However, capitalism does work with the grain of human nature.

Because there is no limit to how much work someone can do or how much he can earn for
himself, capitalism encourages competition and high productivity, because good
performance can lead to higher pay, promotions, and getting a job in the first place. When
people perform well they turn out better goods and services, which in turn enhance the
society that partakes of them.
The working class people are paid to produce goods and services which are then sold for a
profit. The profit is gained by the capitalist class because they can make more money
selling what have been produced than it costs to buy on the labor market. In this sense, the
working class is exploited by the capitalist class. The capitalists live off the profits they
obtain from exploiting the working class whilst reinvesting some of their profits for the
further accumulation of wealth.
It may not be exactly clear which class some relatively wealthy people are in. But there is
no ambiguity about the status of the vast majority of the world's population. Members of
the capitalist class certainly know who they are. And most members of the working class
know that they need to work for a wage or salary in order to earn a living (or are
dependent upon somebody who does, or depend on state benefits.)
The profit motive
In capitalism, the motive for producing goods and services is to sell them for a profit, not to
satisfy people's needs. The products of capitalist production have to find a buyer, but this is
only incidental to the main aim of making a profit, of ending up with more money than was
originally invested. Production is started not by what consumers are prepared to pay for to
satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods
may satisfy human needs but those needs will not be met if people do not have sufficient
money.
The profit motive is not just the result of greed on behalf of individual capitalists. They do
not have a choice about it. The need to make a profit is imposed on capitalists as a
condition for not losing their investments and their position as capitalists. Competition
with other capitalists forces them to reinvest as much of their profits as they can afford to
keep their means and methods of production up to date.
We hold that it is the class division and profit motive of capitalism that is at the root of
most of the world's problems today, from starvation to war, to alienation and crime
environmental pollution and the effects of global warming and climate change. Every
aspect of our lives is subordinated to the worst excesses of the drive to make profit.
Ethical issues in business arose simultaneously or soon after. The work of two more recent
thinkers, Adam Smith, and Herbert Spencer and their thinking have influenced much of
what today we take to be the relationship between economics and ethics. The “popular
views” of their writings do not represent the full body of their texts; yet these popular
views have had profound implications in economics and in applied ethics. At the same time,

if one carefully reads their work, each has something importantly new to contribute to
contemporary analyses in applied ethics. Adam Smith has been called the father of the
Industrial Revolution, the first neoclassical political economist, and one of the earliest
defenders of private free enterprise. Yet, interestingly, almost since his death there has
developed a drawing of his best-known treatise on political economy.
Ethics Vs. Capitalism
Can Business Ethics & Capitalism coexist?
The concept of business ethics has tried to change the way businesses operate over the
years. Business ethics is a form of ethics that governs the actions of businesses to
circumvent the affects business has on every day society. But some question its
effectiveness in the application of capitalism. Several case studies have shown that this is
the case; many companies place the pursuit of money in front of the pursuit of virtue.
Although, the majority of companies are not in the spotlight of acting unethically, can we
conclude that they follow the ethical norms? It is natural for normal human beings to act
ethical but businesses are on a completely different playing field.
But could business ethics be clearly possible in capitalism?

In order to understand the debate of business ethics, one must understand the concept of
capitalism. Capitalism in its purest form is free enterprise, meaning that the market
functions with minimal interference.
From government and other forces. If this is possible then businesses compete with each
other on an equal playing field and whoever has the upper hand can gain much of the
market. Each business will fight for there own share of the market and it is basically
survival of the fittest, whoever has the better product, price, quality will win over
customers.
Capitalism is a free-market approach to economics but one other practice makes capitalism
different from any other economical system. Within capitalism investors play a large part
in business in capitalism. In theory there are several different kinds of investors in
capitalism. One can ‘loan' money to a company and the company will promise to return that
loan with interest but the most common type of investment is ownership into the company
or business.
Most business ethicists agree that free markets have a self-correcting tendency that will
punish dishonest managers while rewarding those that create value for a broad range of
constituents. This fundamental feature of business success is frequently lost amidst all the
egoistic, "whatever it takes," "greed is good" messages that populate a good deal of
conversations about business.
Qn; is capitalism ethical?
Qn; under what conditions is government regulation of business justified?

It depends on the Ideology: a system of normative beliefs.
A person’s ideology:
 Colors perceptions
 Influences actions
Spectrum of Ideologies
 Individualistic ideology:
– Each person is responsible for themselves
– Role of government is limited:
– Protect private property
– Enforce contracts
 Communitarian ideology:
– Role of government broad:
– Define needs of society & ensure needs are met. Example: “it takes a village to
raise a child”.
Fundamental Choices
 What goods and services should be produced?
 How should the goods and services be produced?
 Who should get the goods and services?
Adam Smith (1723–1790)
 1776: “The Wealth of Nations”
Why do some societies do better than others?
• Not because of access to natural resources
• Not because of exporting more than importing (Mercantilism)
• Answer: Capitalism
From the Utilitarian perspective
 Capitalism is ethical on utilitarian grounds

– Private property and unregulated free markets produce the greatest net
social benefits of any socioeconomic system: laissez-faire
 Limited role of government:
– Enforce contracts
– Therefore, government regulation of business is unethical on utilitarian

grounds
Critics of Adam Smith
 Free (unregulated) markets only consider the benefits and costs borne by the buyer
and seller
But are the benefits and costs always borne exclusively by the buyer and seller?
• Example: water pollution of a river, cigarettes, college education.
 Externality: a benefit or cost borne by someone other than the buyer or seller
Government Regulation
 If there are externalities, then it may be possible to design a government regulation

that corrects the externality in a way that maximizes net social benefits.
If so, then the government regulation is ethical on utilitarian grounds.
• Example of external cost: water pollution of a river
• Example of external cost: cigarettes
Example of external benefit: college education
Using the Rights perspective by John Locke (1632–1704)
 Humans have “natural rights”:
– Liberty (freedom)
– Private property
 Why? Without government, humans would be in a “state of nature”
– Freedom: Free of all human-made laws
– Property: Resources combined with work
Common fear: theft of freedom or property

 Humans therefore invented government
 Purpose of government:
– Protect liberty (freedom)
 Capitalism is ethical on rights grounds
– Based on liberty and private property
 Government regulation unethical
– Infringes on liberty and private property
Critics of John Locke
 Are the liberty and property rights of the buyer and seller the only relevant rights?
– Example: cigarettes
 If there are rights at stake in addition to the liberty and property rights of the buyer
and seller, then government regulation might be justified to protect all the relevant
rights.
– Example: cigarettes

Ethics Notes 111

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ethics Notes 111

Uploaded by

Copyright:

Available Formats

BUSINESS ETHICS NOTES

However, an assessment of morality based on adherence to practices and historical

Prepared by mpaata zaid– (MUBS) Page 1

Broad areas of business ethics and key terms

Kohlbergian four components and addressed the Kohlbergian deficiencies by designing a

Prepared by mpaata zaid– (MUBS) Page 2

 following universal moral laws,

 greatest good for the greatest number,(utilitarian theory)

 having a primary concern for others’ welfare, (Kantian theory)

 promoting high moral character in leaders, (virtue ethics)

Prepared by mpaata zaid– (MUBS) Page 3

Two Broad Areas of Ethics in relation to Business

1. Managerial mischief/harm/misbehavior includes "illegal, unethical, or questionable

Key Roles and Responsibilities of Management in ethics.

Development of ethics programmes

Consider assigning/developing an ethics officer (ombudsperson);this role is becoming

Prepared by mpaata zaid– (MUBS) Page 4

Myths about Ethics

3. Myth: Business ethics is a discipline best led by philosophers, academics, theologians,

6. Myth: Many believe business ethics is a recent phenomenon because of increased

Prepared by mpaata zaid– (MUBS) Page 5

It is application of ethics to the corporate community, a way to determine responsibility in

Development of ethics programmes

 Ethics communication systems, providing a means for employees to report abuses or

 Ethics officers or ombudspeople charged with coordinating policies, providing ethics

 Ethics training programmes, aimed at helping employees to recognize and respond

Prepared by mpaata zaid– (MUBS) Page 6

 Disciplinary processes to address irresponsible behavior.

Ethics programs should include;

Guidelines for Managing Ethics in the Workplace

The following guidelines ensure the ethics management program is operated in a

Determine preferred behaviors in the workplace. ; As with any management practice,

Prepared by mpaata zaid– (MUBS) Page 7

Benefits of Managing Ethics in the Workplace

Prepared by mpaata zaid– (MUBS) Page 8

Ethics programs help maintain a moral course in turbulent times; Attention to

Prepared by mpaata zaid– (MUBS) Page 9

It helps in managing ethical values in the workplace, legitimizes managerial actions,

ETHICS, MORALITY AND THE LAW

MORALITY AND MORAL PROBLEMS

Reasoning refers to any systematic mental process that constructs or evaluates

Prepared by mpaata zaid– (MUBS) Page 10

perspectives might be applied to ethical dilemmas and consider the ramifications of

Moral reasoning itself has two essential components: an understanding of what

Prepared by mpaata zaid– (MUBS) Page 11

ETHICAL REASONING PROCESS

Kohlberg’s Stages of Moral Development

Prepared by mpaata zaid– (MUBS) Page 12

His basic interview consists of a series of dilemmas such as the following:

Heinz Steals the Drug

Prepared by mpaata zaid– (MUBS) Page 13

Focuses on self-pain or pleasure.

Prepared by mpaata zaid– (MUBS) Page 14

Prepared by mpaata zaid– (MUBS) Page 15

Stage 6 - defines the principles by which we achieve justice.

Prepared by mpaata zaid– (MUBS) Page 16

 Decisions are based on universal principles of justice. Requires objective evaluation

Prepared by mpaata zaid– (MUBS) Page 17

ETHICS AND THE LAW

Prepared by mpaata zaid– (MUBS) Page 18

TRADITIONAL APPROACHES TO BUSINESS ETHICS

Traditional ethical theories