Business Ethics

Concepts & Cases

Manuel G. Velasquez

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Chapter One
Basic Principles: Ethics and
Business

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Ethics and Morality

Ethics is the study of morality.
Morality = The standards that an individual or
a group has about what is right and wrong, or
good and evil.
Example: B.F. Goodrich A7-D Fraud

Moral Standards = norms about the kinds of

actions that are morally right and wrong, as
well as the values placed on what is morally
good or bad.
Non-Moral Standards: The standards by which
we judge what is good or bad and right or
wrong in a non-moral way.
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Five Characteristics of Moral

Standards
Involve significant injuries or benefits
Not established by authority figures
Should be preferred to other values
including self-interest
Based on impartial considerations
Associated with special emotions and
vocabulary.

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What is Business Ethics?

Broadly, ethics is the discipline that
examines ones moral standards or
the moral standards of a society to
evaluate their reasonableness and
their implications for ones life.
Business ethics is a specialized study
of moral right and wrong that
concentrates on moral standards as
they apply to business institutions,
organizations, and behavior.
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Types of Ethical Issues

Systemicethical questions about
the social, political, legal, or
economic systems within which
companies operate.
Corporateethical questions about a
particular corporation and its
policies, culture, climate, impact, or
actions.
Individualethical questions about a
particular individuals decisions,
behavior, or character.
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Can ethical qualities be attributed

to corporations?
View #1: corporations, like people, act
intentionally and have moral rights, and
obligations, and are morally responsible.
View #2: it makes no sense to attribute
ethical qualities to corporations since they
are not like people but more like machines;
only humans can have ethical qualities.
View #3: humans carry out the
corporations actions so they are morally
responsible for what they do and ethical
qualities apply in a primary sense to them;
corporations have ethical qualities only in a
derivative sense.
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Arguments Against Business

Ethics
In a free market economy, the
pursuit of profit will ensure maximum
social benefit so business ethics is
not needed.
A managers most important
obligation is loyalty to the company
regardless of ethics.
So long as companies obey the law
they will do all that ethics requires.
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Arguments Supporting Business

Ethics
Ethics applies to all human activities.
Business cannot survive without
ethics.
Ethics is consistent with profit
seeking.
Customers, employees, and people in
general care about ethics.
Studies suggest ethics does not
detract from profits and seems to
contribute to profits.
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MERCK AND COMPANY

Should the company develop a drug that was potentially life-saving but
little chance of making a profit.
The drug was Ivermectin, one of their best-selling animal drugs. The
potential market for the drug was those suffering from river blindness an
agonizing disease afflicting about 18 million poor people in Africa and
Latin America. The need for the drug was clear but users of the drug are
poor. Merck would never recoup the $100 million cost to develop the
human version of the drug.
If there proved to be adverse human side effects, this might affect sales
the animal version that were $300 million of Mercks $2 billion annual
sales. Congress was getting ready to pass the Drug Regulation Act, which
would intensify competition in the drug industry by allowing competitors
to more quickly copy and market drugs originally developed by other
companies.
Questions: Was Merck morally obligated to develop this drug?
Merck managers felt they were. Even gave the drug away for free. Most
companies would probably not invest in an R & D project that promises no
profit. Merck, as a for-profit corporation, has responsibilities to its
shareholders to make a profit. Companies that spend all their funds on
unprofitable ventures will find themselves out of business. In the long
run, Merck will benefit from this act of kindness as ethical behavior can
give a company significant competitive advantages over companies that
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are not ethical.

Etika Deskriptif & Etika Normatif

Etika
Deskritif
Etik
a
Etika
Normatif
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1.5 Etika Deskriptif & Etika Normatif

Etika Deskritif

disiplin yang membincangkan sejarah

sistem moral

menyatakan apakah sistem moral yang

dianuti oleh seseorang individu @ golongan
tertentu

cuba menghurai . tidak cuba untuk

mencapai apa-apa
kesimpulan mengenai perkara apakah
yang
sebenarnya
baik
dan
buruk
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Education,
Inc. All rights
reserved.@ betul &

1.5 Etika Deskriptif & Etika Normatif

Kajian/Etika Normatif
suatu penyiasatan untuk cuba
mencapai kesimpulan normatif
- kesimpulan mengenai perkara apa
yang
baik atau buruk
- kesimpulan mengenai tindakan
apa yang
betul atau salah
menilai, mengkritik dan membuat
keputusan terhadap sistem moral
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Corporate Social
Responsibility
Corporate social responsibility refers
to a corporations responsibilities or
obligations toward society.
Business ethics is both a part of
corporate social responsibility and
part of the justification for corporate
social responsibility.
Shareholder vs. Stakeholder Theory
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New Issues in Business

Ethics
Advances in technology often create
new issues for business ethics.
Currently, advances in information
technology are creating new issues in
business ethics.

Increasing connections between the

economic and social systems of
different nations, known as
globalization, has also created new
issues in business ethics.
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Resolving Cross-Cultural Ethical

Differences
Moral Relativism = the theory that
there are no ethical standards that are
absolutely true and that apply or should
be applied to the companies and people
of all societies.
Objections to Moral Relativism:
Some moral standards are found in all
societies;
Moral differences do not logically imply
relativism;
Relativism has incoherent consequences;
Relativism privileges whatever moral
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Resolving Cross-Cultural Ethical

Differences
According to the Integrative Social
Contracts Theory (ISCT), there are
two kinds of moral standards:
Hypernorms: those moral standards that
should be applied to people in all
societies.
Microsocial norms: those norms that
differ from one community to another
and that should be applied to people
only if their community accepts those
particular norms.
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Kohlbergs Three Levels of Moral

Development
First Level: Pre-conventional Stages
Stage One: punishment and obedience
orientation
Stage Two: instrumental and relative
orientation

Second Level: Conventional Stages

Stage One: interpersonal concordance
orientation
Stage Two: law and order orientation

Third Level: Post-conventional Stages

Stage One: social contract orientation
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Moral Reasoning
The reasoning process by which
human behaviors, institutions, or
policies are judged to be in
accordance with or in violation of
moral standards.
Moral reasoning involves:
The moral standards by which we
evaluate things
Information about what is being
evaluated
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Four Steps Leading to Ethical

Behavior
Step One: Recognizing a situation is an
ethical situation.
Requires framing it as one that requires
ethical reasoning
Situation is likely to be seen as ethical
when:
involves serious harm that is concentrated,
likely, proximate, imminent, and potentially
violates our moral standards

Obstacles to recognizing a situation:

Euphemistic labeling, justifying our actions,
advantageous comparisons, displacement of
responsibility, diffusion of responsibility,
distorting
the
harm,
and Inc.
dehumanization,
and
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2012
Pearson Education,
All rights reserved.

Four Steps Leading to Ethical

Behavior
Step Two: Judging the ethical course
of action.
Requires moral reasoning that applies
our moral standards to the information
we have about a situation.
Requires realizing that information about
a situation may be distorted by biased
theories about the world, about others,
and about oneself.
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Four Steps Leading to Ethical

Behavior
Step Three: Deciding to do the
ethical course of action.
Deciding to do what is ethical can be
influenced by:
The culture of an organizationpeoples
decisions to do what is ethical are greatly
influenced by their surroundings.
Moral seductionorganizations can also
generate a form of moral seduction that
can exert subtle pressures that can
gradually lead an ethical person into
decisions to do what he or she knows is
wrong.
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Four Steps Leading to Ethical

Behavior
Step Four: Carrying out the ethical
decision.
Factors that influence whether a person
carries out their ethical decision include:
Ones strength or weakness of will
Ones belief about the locus of control of
ones actions

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Moral Responsibility
Three Components of Moral
Responsibility
Person caused or helped cause the
injury, or failed to prevent it when he or
she could and should have (causality).
Person did so knowing what he or she
was doing (knowledge).
Person did so of his or her own free will
(freedom).
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Factors that Mitigate Moral

Responsibility
Minimal contribution

In general, the less ones actual actions contribute

to the outcome of an act, the less one is morally
responsible for that outcome.

Uncertainty

A person may be fairly convinced that doing

something is wrong yet may still be doubtful about
some important facts, or may have doubts about
the moral standards involved, or doubts about how
seriously wrong the action is.

Difficulty

A person may find it difficult to avoid a certain

course of action because he or she is subjected to
threats or duress of some sort or because avoiding
that course of action will impose heavy costs on the
person.
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