Chapter 1

Understanding Business Ethics
Stanwick and Stanwick

3rd Edition
Chapter 1
The Foundation of Ethical Thought
Learning Objectives
1. Define the terms ethics and business ethics.

2. Describe the different types of ethical examinations and
frameworks.
3. Explain the seven deadly sins and their relationship to
ethical behavior.
4. Discuss the Global Business Standards Codex with
respect to a company’s responsibility.
1-2
Ethics
The values an individual uses to interpret
whether any particular action or behavior is
considered acceptable or appropriate.
Questions to Ask:
1. Is the behavior or action consistent with the overall
basic duties of the individual?
2. Does the behavior or action acknowledge and respect
the underlying rights of all the individuals who will be
impacted by the action?
3. Would the behavior or action be considered the best
practice in that specific set of circumstances?
4. Does the behavior or action match the overall
entrenched beliefs of the individual?
1-3
Business Ethics
The collective values of a business organization that
can be used to evaluate whether the behavior of the
collective members of the organization are considered
acceptable and appropriate.
1-4
The Role of Morals
The moral values of an individual comprise

three distinctive components:
1. Individual’s Principles
2. Individual's Character
3. Consequences of a Particular Action
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The Role of Morals
1. Individual’s Principles:
Religious Affiliations: to determine “right” from “wrong”
Moral values of Society: to determine acceptable principles
2. Individual’s Character:
Strength of the character: Moral beliefs even it cost more
Virtue: Prudence, fairness, trustworthiness, courage
Integrity: Ability to have a clear conscience
3. Consequences of a Particular Action:

Focus on moral importance to “ends” and “means”
Strive for morally positive outcome and not only action
1-6
Why Study Business Ethics & Social
Responsibility?
Ethical behavior and corporate social responsibility can bring significant
benefits to a business. For example, they may:
• Create good image of the company in the minds of customer, shareholders
and govt.
• Attract customers to the firm's products, thereby boosting sales and profits.
• Achieve sustainable business
• Make employees want to stay with the business, reduce labor turnover and
therefore increase productivity.
• Attract investors and keep the company's share price high.
• Unethical behavior or a lack of corporate social responsibility, by comparison,
may damage a firm's reputation and make it less appealing to stakeholders.
Profits could fall as a result.
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Foundation of Ethical Theory
Initially classified based on what perspective is considered by the reader:

1. Descriptive Ethics
2. Analytical Ethics
3. Normative Ethics
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1. Descriptive Ethics:
• Also known as Comparative Ethics
• The presentation of facts related to the specific ethical actions of
an individual or organization
• Used how and when an observer wants to understand the course
of events that generated the ethical issue
• No interpretation of the facts or assumptions concerning why that
course of action took place
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2. Analytical Ethics:
• Also known as Meta Ethics.
• Understanding the reasons, a course of action that may have an ethical
impact took place
• Moves from the how and when inquiry, which is the basis of the
descriptive ethics viewpoint, to asking why
• Hypotheses can be developed to help understand the relationships
among different variables impacting ethical behavior
• Addresses the ‘motive’ behind the actions instead of just being satisfied
with a description of the actions
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3. Normative Ethics:
• A prescribed course of action that attempts to ensure that ethical
behavior will be followed in the future
• Moves the evaluation of ethical behavior from the past to future tense
• Presents information on what should be done in the future rather than
what was done in the past, both part of descriptive and analytical ethics
• Allows employees and managers to address potential ethical issues
before they occur
• Use of ethical tools (like ethics codes) help direct the normative ethical
behavior by presenting what are acceptable and unacceptable types of
behavior tolerated within the firm
• Ethical codes may include Integrity, Team-work, Objectivity,
Confidentiality and Growth
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Types of Ethical Frameworks
1. Teleological Framework
2. Deontological Framework
3. Mixed Framework
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Types of Ethical Frameworks:
Teleological Frameworks
• Focus on the results of the conduct of the individual
• Focus on the ramification (outcomes), positive and negative, resulting
from the conduct of individuals
• Three types of Teleological frameworks are:

1. Ethical Egoism
2. Utilitarianism
3. Sidgwick’s Dualism
1-13
1. Ethical Egoism:
• Focusing on each individual’s self interest.
• Based on the belief that every individual should act in a
way to promote himself/herself if the net result will
generate, on balance, positive rather than negative results.
• Without self-interest, someone would not do anything.
• Ethical egoists argue that their philosophy supports a “win-
win” proposition. An individual will reward his or her self-
interest while yielding benefits for the rest of society.
• Derived from the Latin word ego, which is defined as one’s
self, ethical egoism allows self-interests to play a role in the
actions of the individual as long as there are also positive
benefits for others.
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2. Utilitarianism:
• Based on the principle of utility.
• Each person’s actions add to the overall utility of the community
impacted by those actions
• Focus on the net result of their actions instead of the means or motives
that generated the reason for their actions.
• Without utilitarianism, people will not help others if the actions don’t
benefit their self-interest.
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3. Sidgwick’s Dualism:
• Attempts to bridge the gap between the two competing ethical
frameworks of Ethical Egoism and Utilitarianism.
• Attempts to resolve the difference of whether the actions of one’s self-
benefit affect just the individual or the others.
• It is not logical for an individual to sacrifice his/her own happiness to
help others.
• How individuals act in their self-interest as well as in the interest of
others.
• Adam Smith presented an argument that could support Sidgwick’s
dualism – argues the greatest good for the greatest number is achieved
by individuals pursuing their self-interests in the marketplace.
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Deontological Frameworks
• Focus on the duty or obligation in determining whether the actions
are right or wrong.
Three types of Deontological Frameworks are:

1. Existentialism
2. Contractarianism
3. Kant’s Ethics
1-17
1. Existentialism:
• Based on the underlying belief that the only person who can
determine right and wrong is the person making the decisions
• Everyone determines his or her own actions and is ultimately
responsible for the consequences of those actions.
• Individuals can develop their own sense of personal virtue.
• Does not use universal principles as everyone determines the
acceptance of his/her actions.
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2. Contractarianism:
• Social contract theory
• Based on the belief that all individuals agree to social contracts
to be members within a society.
• Membership in society comes with certain duties and
responsibilities.
• Everyone should have equal rights and duties.
• Individuals agree to the norms of the society by establishing a
social contract with other members.
• If the principles are fair, everyone should agree to abide by
them and generate equal benefits.
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3. Kant’s Ethics:
• Ethical decisions based on the free will of the individual
• The free will to make decisions that were considered rational
needed to be converted into a universal will.
• Attempts to bridge the gap between Existentialism and
Contractarianism point of view.
• The individual should act in a way in which one would expect
everyone to act, if it were a universal will.
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Mixed Frameworks
Seven guiding principles that are considered part of the prima facie obligation an
individual has to the society:
1. Fidelity: an individual needs to keep explicit and implicit promises
2. Reparation: an individual must act on repairing the consequences for previous
wrongful acts.
3. Gratitude: an individual must be able to show gratitude for the kindnesses that
others have given him/her.
4. Justice: an individual should try to see that any goods are fairly distributed.
5. Beneficence: an individual should focus on trying to improve the lives of others.
6. Self-Improvement: an individual should improve oneself by focusing on virtue
and intelligence.
7. Noninjury: an individual should not cause any harm to others
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Which of the teleological frameworks most closely match

your ethical beliefs? Under what circumstances would you
shift toward another of the frameworks?
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Which of the teleological frameworks most closely match

your ethical beliefs? Under what circumstances would you
shift toward another of the frameworks?
• The teleological frameworks that closely match one's ethical
beliefs and the circumstances that might lead to a shift in those
frameworks.
• Teleological frameworks, such as consequentialism and
utilitarianism, focus on the outcomes and consequences of
actions to determine their ethical value.
• As an individual, my ethical beliefs may align more closely
with one of these frameworks or a combination of them,
depending on personal values and principles.
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If you were trapped in a sandstorm in desert, what would

you do to stay alive and provide for your family?
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• If you were trapped in a sandstorm in desert, what would

you do to stay alive and provide for your family?
• In the hypothetical scenario of being trapped in sandstorm
in a desert, the immediate priority would be survival and
providing for my family's safety and well-being.
• In such extreme circumstances, the ethical decision-making
process may involve a combination of teleological
frameworks, deontological considerations (such as moral
duties and principles), and situational factors.
• The primary focus would be on taking actions necessary for
survival and protecting the lives of loved ones, considering
the available resources, risks, and potential consequences.
•
The Seven Deadly Sins
The seven deadly sins are as follows:
1. Lust: Trait of an individual who has obsessive and continuous
thoughts of sexual desire.
2. Gluttony: Overindulgence and overconsumption of anything.
3. Greed: Excessive desire by an individual to obtain wealth, status
and power.
4. Sloth: Being lazy, indifferent, sad and lack of joy in his/her life
5. Wrath: Uncontrollable level of anger that can lead to revenge and
vigilantism.
6. Envy: Desire to obtain qualities or possessions of another person
even to deprive him/her.
7. Pride: Competitively measuring one person’s qualities or actions,
based on the qualities or actions of another person. It is considered
to be the source of other six sins.
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Please rank the seven deadly sins from 7 (as most

serious to commit) to 1 (as least serious to commit)?
Lust _____________
Gluttony_____________
Greed _____________
Sloth _____________
Wrath _____________
Envy _____________
Pride _____________
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Please rank the seven deadly sins from 7 (as most

serious to commit) to 1 (as least serious to commit)?
Lust _____________ • The most serious of the seven deadly sins is
subjective and can vary depending on personal
Gluttony_____________ beliefs and values. However, one sin that is often
considered particularly serious is pride.
Greed _____________ • Pride involves an excessive belief in one's own
abilities and superiority, leading to arrogance and
Sloth 1 a disregard for others. This sin is seen as serious
because it can lead to other sins and harmful
Wrath _____________ behaviors, such as greed, envy, and even violence.
• On the other hand, the least serious of the seven
Envy _____________ deadly sins is also subjective and can vary
depending on personal beliefs. However, sloth is
Pride 7 often considered the least serious.
• Sloth refers to a lack of motivation or effort in
performing tasks and responsibilities. While it is
important to be diligent and proactive, sloth is seen
as less serious compared to sins that directly harm
others or oneself..
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Do you think certain sins have gained or been

reduced in importance over time?
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Do you think certain sins have gained or been

reduced in importance over time?
As for whether certain sins have gained or been
reduced in importance over time, it is possible for
societal values and beliefs to evolve, leading to a
change in the perceived importance of certain sins.
For example, in the past, sins such as gluttony or
lust may have been seen as more serious due to
stricter religious or moral standards. However, in
modern times, these sins may be viewed with less
severity as societal norms and values have shifted.
Global Business Standards Codex
• Global Business Standards Codex was established to evaluate the
conduct of the companies around the world.
• This codex captures the eight major underlying principles in which

ethical behavior can be interpreted and evaluated:
1. Fiduciary
2. Property
3. Reliability
4. Transparency
5. Dignity
6. Fairness
7. Citizenship
8. Responsiveness
1-31
1. Fiduciary Principle
• Each officer has a legal fiduciary duty to act in the best interests of the
stakeholders and other employees within the firm.
• An implied fiduciary duty for every employee to act in a way that
generates positive benefits for the firm.
Examples: conflicts of interest, good faith efforts for carrying out
responsibilities. Prudence with the company’s resources, loyalty.
1-32
2. Property principle
• Based on the belief that every employee should respect property as
well as the rights of the owners of the property.
• Expected that the employee should be a good steward to the resources
that he/she has access to.
Examples: theft, misappropriation of funds, wasting resources,
misappropriation of intellectual property
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3. Reliability principle:
• Based on the belief that it is the employee’s responsibility to honor the
commitments he or she has made to the firm.
Examples: breaching a promise or contract, not fulfilling a promised
action, ensuring that suppliers and other business partners are paid
in a timely manner
1-34
4. Transparency principle
• Based on the belief that every employee should conduct business in a
truthful and open manner.
• Assumes that employees will not make decisions based on a personal
agenda
Examples: keep accurate and current records of business
obligations, fraudulent and deceptive actions of the employee,
financial information is presented in a truthful and accurate way
1-35
5. Dignity principle
• Based on the belief that each employee needs to respect the dignity of
all individuals
• Encourages the enhancement of human development not only within
the company and the marketplace, but also in the society at large
Examples: ensuring the human rights of health, safety and privacy
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6. Fairness principle
• Based on the belief that stakeholders who have a vested interest in the
firm should be treated fairly
• Reciprocal fairness, distributive fairness, fair competition, procedural
fairness
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7. Citizenship Principle:
• Based on the belief that every employee should act as a responsible
citizen in the community
• Expected that employees respect the laws of the community – criminal,
competition, environmental, corporate social responsibility.
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8. Responsiveness Principle:
• Based on the belief that employees have a responsibility to respond to
the requests for information about the operations from various
stakeholders
• Expected to react in a timely manner.
1-39
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Using the principles set forth in the Global Business

Standards Codex, find an example of a company that does
or did not follow one of the principles. Discuss the
implications of the company’s action.
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Using the principles set forth in the Global Business Standards

Codex, find an example of a company that does or did not follow
one of the principles. Discuss the implications of the company’s
actions.
Global Business Standards Codex provides principles for ethical
business behavior.
• One example of a company that did not follow one of these principles
is Enron.
• Enron, an energy company, violated the principle of transparency
and integrity.
• The company engaged in fraudulent accounting practices to hide debt
and inflate profits, misleading investors and stakeholders.
The implications of Enron's actions were severe.
• The company eventually filed for bankruptcy, leading to significant
financial losses for shareholders and employees.
• The scandal also undermined trust in the financial markets and
highlighted the importance of ethical business practices.
• The case of Enron serves as a cautionary tale about the consequences
Ethical Thoughts
“The biggest corporation, like the humblest citizen,

must be held to strict compliance with the will of
the people.”
Theodore Roosevelt
“We demand that big business give people a

square deal, in return we must insist when anyone
engaged in big business honestly endeavors to do
right, he shall himself be given a square deal.”
Theodore Roosevelt
1-42
Ethics in Action
• Trevor Field wanted to give back to the
community
• Watched women in South Africa carry water from
the watering hole everyday, when they could be
doing more productive things
• Designed a water pump that could be used by
children when they play to pull water from the
deeper points in the ground where the water is
not contaminated and is cooler – works like a
merry-go-round
• Field sells advertising for the water towers where
the water is collected
1-43
Ethics in Action
● Each pump costs about $7,000 (US $) to install

● Play Pumps International received a check in
2006 from the US government, the Case
Foundation and the MCJ Foundation to help
support the expansion of Field’s project
● Field’s goal is to raise $45 million (US $) by 2010
to help ten million African citizens gain access to
clean drinking water
1-44
Questions for Thought
• Choose an event in your life where you believe

you acted ethically. Discuss the event in terms of
the teleological frameworks discussed in the text.
• Using the same event, you chose in question 1
above, discuss the event in terms of the
deontological frameworks discussed in the text.
1-45
Questions for Thought
• Choose any Fortune 500 Company. Locate the

company’s code of ethics published on the
company’s Web page. Evaluate the code of ethics
in terms of the Global Business Standards Codex.
• Using the principles set forth in the Global
Business Standards Codex, find an example of a
company that does or does not follow one of the
principles. Discuss the implications of the
company’s actions.
1-46
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Printed in the United States of America.
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Understanding Business Ethics

Stanwick and Stanwick

1. Define the terms ethics and business ethics.

The moral values of an individual comprise

3. Consequences of a Particular Action:

Initially classified based on what perspective is considered by the reader:

• Three types of Teleological frameworks are:

Three types of Deontological Frameworks are:

Which of the teleological frameworks most closely match

Which of the teleological frameworks most closely match

If you were trapped in a sandstorm in desert, what would

• If you were trapped in a sandstorm in desert, what would

Please rank the seven deadly sins from 7 (as most

Please rank the seven deadly sins from 7 (as most

Do you think certain sins have gained or been

Do you think certain sins have gained or been

• This codex captures the eight major underlying principles in which

Using the principles set forth in the Global Business

Using the principles set forth in the Global Business Standards

“The biggest corporation, like the humblest citizen,

“We demand that big business give people a

● Each pump costs about $7,000 (US $) to install

• Choose an event in your life where you believe

• Choose any Fortune 500 Company. Locate the

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