Chapter 1 - Society will not exist without business.

- Since business is an integral part of society, its

Ethics and Business
activities must be examined from the ethical
Introduction perspective.
- In the same way that society examines politics,
Business is part of human society. economics, government, culture and religion from
the moral point of view.
- It is part of the complex web of interaction among
- The fundamental reason for examining the activities
institutions and people, its activities must be viewed
of business from the moral perspective is for the
and examined from the perspective of morality.
promotion of the common good, protection of the
- Business without ethics threatened the survival of
individual’s interests and the preservation of the
society and in some cases, destroys the fiduciary
human society in general.
relationships of people.
- Without ethics, business will be a chaotic human
The study of Business Ethics paves the way for our common activity because there will be no common
understanding of the fundamental concepts of what is right understanding and agreement about what is the
and wrong in our human conduct and its implications to right and wrong human conduct.
business as an important human activity.
Business is also a complex enterprise that involves major
The Nature of Business activities like purchasing, manufacturing, marketing,
advertising, selling and accounting.
Business is as old as human civilization.
- Businessmen deal with suppliers, customers,
- In the beginning of human existence, men took care workers, employees and even competitors.
of their own needs and wants. - Ironically, it is within this structure of interaction of
- They hunted animals and cultivated the land for food people that a lot of questionable practices occur –
and clothing and people simply provided for their misinterpretation, questionable pricing policies, false
own. advertising, misbranding, lying, adulteration, unfair
- As time went on, some people became more competition, and local price-cutting, among others.
proficient in doing one type of work or in producing - The bottom line is, somewhere, somehow people’s
one or several types of goods. rights are being violated, their values disrespected
- In doing so, other people sought their products and and the interest of the common good disregarded.
services so that they need not spend more time, - Business is a good human activity. However, it is the
money and effort to acquire these goods that they selfish motive and personal interests of dishonest
need. businessman that make business bad and in some
- The “manufacturer” then found out that he could instances, unproductive.
continue supplying the products or services to
people if he had enough funds or goods to barter The Importance of Ethics and Business
with.
The study of Business Ethics paves the way for a common
- He also learned that he could expand his trades if he
ground in our understanding of the fundamental idea of what
was able to acquire more capital needed to continue
is good and what is bad in our human conduct.
his entrepreneurial activities
- The more he acquired funds, the more he was able - Without ethics, people, especially businessmen, will
to supply goods and services to his customers set their own moral standards, moral rules, and
- The requirement therefore is for him to earn profit moral principles.
in order to stay in business and provide the goods - This would result into a kind of subjective morality,
and services needed by the customers. in which case, what is good for one may be bad for
another and vice versa.
For as long as people have needs and wants, there will always
- With this subjective ethical paradigm, business
be business.
people will consider some of their actions good but
- Those who have capital will continue to produce and unacceptable to others, e.g., cheating the customers
sell goods and services that will satisfy the needs and to gain profit may be acceptable to some
wants of customers. businessmen but bad for others.
- Abortion may be correct for one person but evil for
Business is an activity that is part and parcel of human another person.
society.
 - Ethics as a science does not only evaluate the - However, it is the businessman’s wrong perception
morality of our human conduct but also provides us about the role that ethics plays in the world of
with a common understanding of the universal, business that affects his moral judgment and
objective and irreversible moral principles that decision making.
should govern our human behavior and guide our - Here are some myths that businessmen have about
moral decisions. Business Ethics

Another important aspect in business that needs profound Myth #1: Ethics is a Personal Affair and Not a Public
examination is the manner in which business leaders and Debatable Matter
managers confront ethical issues and problems affecting the
- If ethics is a subjective thing, then it will make
flow and dynamism of business activities.
morality very personal and relative, therefor, what is
- One amazing thing that is happening to business good for one person may be bad for another.
enterprises today is the use of the quantitative - If morality is subjective, people will make their own
techniques to measure the viability and profitability moral laws and principles and could be worse if they
of business begin to impose these personal norms on others.
- Because of this trend, business corporations - People are entitled to their own values and religious
nowadays evaluate, measure and predict the beliefs but in the exercise of these value systems,
outcomes of their business plans and decisions in they must also consider the values and religious
terms of profitability and quantity of goods sold. orientations of others.
- Thus, business firms today are capable of predicting
Myth #2: Ethics and Business Do not Mix
the supply and demand of commodities, make
annual budgets, determine the costs and benefits of - Some businessmen claim that Ethics has no place at
their decisions and calculate monthly and yearly all in business.
revenues and profits. - This view is most likely grounded on the assumption
- Certainly, there is nothing wrong with this approach that business is an autonomous human activity
of managing business organizations except that the where ethical standards do not exist and that
quantitative approach is not applicable when businessmen are free to do what they want.
managers talk about moral issues and ethical - The belief that ethics does not mix with business will
problems of people. only justify illegal activities and will most likely
- The resolution of some ethical issues like sexual promote questionable practices in business
harassment, bribery, misrepresentation, theft, activities.
insider trading, conflict of interest and job - Ethics has an important place in business.
discrimination, among others, cannot be resolved by
quantitative approach alone but also by Myth #3: Ethics in Business is Relative
philosophical analysis and moral reasoning.
- Some businessmen claim that morality is relative,
Business ethics, opens a novel way of resolving moral which means the fundamental concepts of right and
problems and ethical dilemmas affecting business wrong depend on cultural and religious values of
transactions and the interactions of people in the corporate people.
world. - This implies further that what may be considered a
right action in one country may be unacceptable in
- The study of Business Ethics will also enhance the another country.
human and interpersonal skills of managers so they - Abortion may be legal in Japan but certainly not in
can be more effective in managing the human side of the Philippines.
the organization - If morality is relative then what is good in one place
may be evil in other places, and vice versa.
The Businessman’s Myths about Business Ethics
- If morality is viewed this way, then who’s going to
Businessmen are not immoral. tell us which actions are good and which actions are
bad objectively?
- It would be disastrous to judge and conclude that
- The truth of the matter is, there are universal moral
business people commit unethical acts in doing
principles that people share and agree upon
business.
regardless of religious orientations, cultural
- Business, certainly is a good and productive human
expressions, and value systems.
activity.
 - All people around the world believe that murder is 3. Laws are insufficient.
always wrong, that stealing is always a bad action - They cannot cover all aspects of our human behavior
and bribery is always unacceptable. - Laws are sometimes absent or unclear in some areas
- The study of ethics paves the way for our common of our human conduct.
understanding of the fundamental principle of right - Ethics is the unwritten law, written in the hearts of
and wrong as reflected in our nature and conduct as men.
human beings. - In the absence of the law, Ethics will help us discern
the correct conduct to follow based on the dictates
Myth #4 : Good Business Means Good Ethics
of conscience and reason.
- A business may be profitable but the means of 4. In today’s technocrat-oriented business education,
acquiring profits may be questionable. the trend is to train managers to maximize profits by
- Drug trafficking is a profitable business and so is quantifying the operations of business.
human smuggling and the like, but they certainly - Certainly, the operations of business must be aided
violate some rules and values of people. by quantitative instruments to measure and predict
expected outcomes
Myth #5: Business is a War - However, this is only one side of managing the
enterprise.
- For the businessmen, the market is an arena of
- Managers and business leaders must also be
gladiators trying to fight for survival and vying for the
prepared to respond the complex situations bearing
number one position.
ethical consequences
- Because of this belief, businessmen often resort to
5. Peter Drucker argues that “the business enterprise is
using predatory tactics to destroy the competitors in
an organ of society and its actions have a decisive
order to emerge as the market leader.
impact on the social scene”.
- Business is a good human activity. And as an integral
- Drucker simply reminds us that a business
part of the society, it must promote healthy
corporation is not just created to make profits but
competition and not destroy the competitors.
also to consider its moral and social obligations to its
The Relationship between Ethics and Business stakeholder.
- Business organizations should not just look after
Ethics plays an important role in business. their own interests but also the interest of the
- Without morality, business will be a chaotic human common good.
activity.
- Ethics is not a study of positive laws intended to
govern and regulate the actions of people doing
business.
- The concern of ethics as a philosophical science is to
discover that there are unwritten laws, written in the
hearts of men that should govern our human
conduct where positive laws may be absent, and in
some cases, not very clear.
- The following arguments justify the significant role
that ethics play in the world of business.

1. Business is an integral part of human society.

Therefore, the actions of individuals and institutions
in business must be subjected to moral values and
moral evaluation
2. In business, an in any other human endeavor, “what
is legal may not necessarily be moral. “People tend
to confuse legality with morality.
- An action may be legal but not necessarily moral.
E.gg. capital punishment (death by lethal injection)
- For some, this is legal but in truth, this is immoral.
- Ethics provides us with a clear distinction between
morality and legality.
Activity No. 1

1. Discuss why Ethics is important in business.

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2. Refute the businessman’s myth that “ethics has no place at all in business”
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3. Explain the phrase: “Not all that is legal is moral, but what is moral is worth legalizing.”
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4. Explain the phrase, “Ethics is the unwritten law written in the hearts of men”.
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Moral Reasoning in Business Businessmen consider profit as a form of anticipated
reward of a compensation for the efforts they spend,
The essence of studying Business Ethics is to provide the
skills they apply and returns for the capital they invested
manager as a decision maker with a framework for the
in putting up and organizing the business.
resolution of moral issues and problems affecting business
activities and the organization itself Traditionally, businesspeople have looked at the profit-
motive as the most important aspect of business.
- Moral reasoning is a process in which ethical issues
and problems are benchmarked against a moral - The view of Milton Friedman, a noted economist,
standard so that a moral judgment is made possible. reflects this sentiment.
- Managers are tasked to solve problems of the - He says that the “only responsibility of business is to
organization and its related activities, it is also the make profit so long as one stays within the rules of
responsibility of managers to help in the resolution, the game and engages in open and free competition
if not the prevention, of moral issues that may have without deception or fraud”.
adverse effects to the operations of the business. - Peter Drucker, an equally famous management
guru(expert) on the other hand, disagrees with this
Characteristics of a Good Moral Standard
view and says that, “the primary responsibility of
1. A good moral standard is one that looks at the issue business is to look for customers and satisfy their
as something that is very serious. E.g. murder, graft needs and wants”.
and corruption, stealing - Drucker, is simply hinting that, although, profit is an
2. A good standard must be grounded on good moral important aspect of business, there are other factors
argument. A good argument is an argument that that the businessman must also consider in doing
always tell the truth. A solid moral arguments leaves business such as customer satisfaction, quality
no room for loopholes and counter arguments products, after sales policies, fair and reasonable
3. A good standard should be objective and not pricing, among others.
subjective. It should be universally accepted and
The Assumptions of Profit Motive
should apply to all. What is good for one person
should be at the same time good for everybody. Understanding the nature and morality of profit-motive starts
4. A good standard, when violated, brings about with the examination of some given factors and assumptions
feelings of guilt, shame, and remorse of conscience. in which the idea of profit-motive operates.

Requirements for a Good Moral Judgment 1. Profit-motive in business is an ethical issue. Since
business is an integral part of society, its activities,
1. A good moral judgment must be logical. This means
including profit-making, must be examined from the
that the decision maker must arrive at an informed
perspective of morality. However, in business, the
resolution of the issue based on logical reasoning.
concept of what is a reasonable profit is still a
2. A good moral judgment must be based on facts and
subject of endless debates.
solid evidence. The information used in the process
2. Profit-motive as an ethical issue operates within the
of moral reasoning must not come from weak
two important aspects of our human conduct – the
sources like hearsay, rumors and grapevine.
freedom and the structure of business. The element
3. A good moral judgment must be based on sound and
of freedom implies that businessmen have the right
defensible moral principles. A weak ethical principle
to decide on the amount of profit they want to earn
is open to a lot of criticisms
in the process of selling goods and services to
The Morality of Profit Motive customers. The structure of business, on the other
hand, is a tacit (unspoken) guideline that governs
People go into business for a number of reasons. business activities including profit-making.
- Thus, any business activity is aimed at a monetary
- Some go into business for personal satisfaction.
gain because that is part of the structure of business.
- Others are in business to earn a livelihood.
The ultimate criterion therefore of gauging the
- Still others are in business because they want to
success or failure of business is its ability to generate
serve the society through the goods and services
profits.
they offer to the customers.
- But the most common, if not the most dominant The Good and Bad Sides of Profit Motive
reason why people go into business, is to make a
profit. A. The Good Side of Profit Motive
 1. Profit-motive motivates people to do something goods sold, overhead, mark-ups, profit margins and
meaningful, e.g, it gives human life a goal to pursue the like?
and something to live for. 2. Making excessive profits is totally wrong. It leads to
2. Profit-motive promotes ingenuity and cleverness in greed, avarice and manipulation of the customers.
running a business, e.g., business leaders and 3. Profit is not the “be all and the end-all” of doing
entrepreneurs have to struggle hard to overcome business. Certainly, there are other factors to be
obstacles in order to achieve success. considered in business such as customers’
3. Profit-Motive makes people productive. Because of satisfaction, respect for the environment,
their desire for money, businessmen have become enhancement of the quality of life and the
productive and some of their products have been preservation of the society.
useful and have enhanced the quality of human life.
The Concept of Moral Responsibility
4. Profit-motive generates potential capital for the
business. Profit is potential capital, something that Man is by nature a being and a creature who is supposed to
can be invested to establish new businesses. In this be responsible and accountable for his actions. The reason for
way, profit also results in more jobs and more goods this is twofold:
and services for the public. The society as a whole
thus benefits from the profits gained by a profit- 1. Man is rational being.
oriented capitalist. - This means he is capable of moral judgment
B. The Bad Side of Profit-Motive - Further, this also means that man is a thinking being,
1. Profit-Motive promotes rivalry among competitors. thus he is aware of his intentions as well as the
Sometimes the competition becomes so stiff that it consequences of his actions.
results into a “dog eat dog” world of business where - Man therefore, knows what he is doing because he is
success is achieved by competing with others and a rational and thinking creature.
pushing them down in order that one’s own business 2. Man is a free being.
might succeed. This certainty dehumanizes business - This means that he has the capacity to exercise his
as an important human activity. choices.
2. Profit-motive makes people focus only on making - This assumes that man is capable of choosing what a
money, that is, to sell as many goods as possible good is and a bad action for him.
without considering whether or not these products
These two assumptions provide the bases for giving praise,
satisfy the needs and wants of consumers and end –
blame, reward and punishment for his actions.
users.
3. Profit-motive turns the businessman from being - These assumptions likewise provide the reasons why
reflective and a questioning person because he we are held responsible for our actions.
focuses his attention only on the practical activity of - These assumptions, e.g, that we are a thinking and
making money. Thus, a life centered on profit only free being, imply that we are capable of assuming
results into a narrow view of existence, deficient in responsibility. For our actions
many important dimensions of human life.
4. Profit-motive promotes self-interest rather than the There are three meanings of moral responsibility.
common good. It has, to some extent, benefited 1. Moral responsibility refers to holding to people
some businessmen, but it has also created some accountable for some past action. This simply means
social costs that many people, if not the majority, assigning to people blame or praise for particular
have to bear, e.g., depletion of the natural actions that they have performed
resources, toxic wastes being thrown into the rivers, 2. Moral Responsibility also means care, welfare or
pollution of the environment and disregard for the treatment of others as derived from the specific
next generations to come. social role that one plays in the society. Thus parents
Ethical Considerations of Profit Motive in Business are responsible for taking care of their children in
the family, doctors are responsible for the
1. Earning profit is a good and valid activity in business. treatments of their hospital patients. In this second
Commercial activities will be absurd without the sense, moral responsibility implies a duty to be
profit-motive. However, in the process of generating performed by a person depending on his role
profit, an ethical discernment is required for the 3. Moral responsibility likewise refers to one’s capacity
businessman: Is my profit fair enough for me and my for making moral or rational decisions on his own. If
customers? Did I consider important factors and a person is not morally responsible, he or she cannot
parameters in making profit such as the costs of be considered morally responsible.
Activity No. 2

1. What is your personal view on profit-motive?

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2. Do you agree with Milton Friedman that the only responsibility of business is to maximize profits? Why or why
not? Discuss your answer.
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3. What is your concept of reasonable profit?
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4. Why do we need to be a moral responsible person?

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