Chapter 1: 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.

• 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.

What is Business Ethics?

• Broadly, ethics is the discipline that examines

one’s moral standards or the moral standards

of a society to evaluate their reasonableness

and their implications for one’s 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.

Moral Standards

• Producing what the buying public wants may

not be the same as producing what the

entirety of society needs. The argument is

essentially making a normative judgment on

the basis of some assumed but unproved

moral standards.

Types of Ethical Issues

• Systemic—ethical questions about the social,

political, legal, or economic systems within

which companies operate.

• Corporate—ethical questions about a

particular corporation and its policies, culture,

climate, impact, or actions.

• Individual—ethical questions about a

particular individual’s decisions, behavior, or

character.

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 corporation’s 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.

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 manager’s 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.

• The “Loyal Agent Argument” states: An

employer would want to be served in

whatever

• ways will advance his or her self-interests.

Therefore, as a loyal agent of his or her

• employer, the manager has a duty to serve his

or her employer in whatever ways will

• advance the employer’s self-interests.

• 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.

• Corporate social responsibility refers to a

corporation’s 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

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.

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 standards are

widely accepted in a society.

• 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.

Kohlberg’s 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

– Stage Two: universal principles orientation

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

– A moral judgment about what is being evaluated.

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 dehumanization, and

attribution of blame.

• 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.

• Step Three: Deciding to do the ethical course

of action.

– Deciding to do what is ethical can be influenced by:

• The culture of an organization—people’s decisions to

do what is ethical are greatly influenced by their

surroundings.

• Moral seduction—organizations 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.

• Step Four: Carrying out the ethical decision.

– Factors that influence whether a person carries

out their ethical decision include:

• One’s strength or weakness of will

• One’s belief about the locus of control of one’s actions

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 dehumanization, and

attribution of blame.

• 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.

• Step Three: Deciding to do the ethical course

of action.

– Deciding to do what is ethical can be influenced by:

• The culture of an organization—people’s decisions to

do what is ethical are greatly influenced by their

surroundings.

• Moral seduction—organizations 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.

• Step Four: Carrying out the ethical decision.

– Factors that influence whether a person carries

out their ethical decision include:

• One’s strength or weakness of will

• One’s belief about the locus of control of one’s actions

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).

Factors that Mitigate Moral Responsibility

• Minimal contribution

– In general, the less one’s 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.

. Karl Marx offers the most critical view of modern private

property and free market

institutions. Marx claims that free-market capitalism

necessarily produces:

a. Extremes of inefficiency

b. Extremes of efficiency

c. Extremes of equality

d. Extremes of inequality

. Karl Marx offers the most critical view of modern private

property and free market

institutions. Marx claims that free-market capitalism

necessarily produces:

a. Extremes of inefficiency

b. Extremes of efficiency

c. Extremes of equality

d. Extremes of inequality