Chapter 1. Introduction to Ethics ethics of responsibility.

The
and Business businessman must promise that
he will not harm knowingly”.
Good people do not need law to
tell them to act justly, while bad people Nature of Business Ethics
will find a way around the laws.  Contains rules and principles
-Plato  Voluntary
 Avoids cheating and frauds
Ethics –it is derived from Greek word  Education and training
“ethikos”, meaning “arising from habit”, required
or character.  Dynamic concept
- it is a branch of social science  Social welfare
that deals with moral principles and social  New concept
values.
Importance of Business Ethics
Business ethics – is a study of proper  The study of business ethics
business policies and performs regarding paves the way for a common
possibly controversial issues, such as ground in our understanding of
corporate governance, insider trading, the fundamental idea of what is
bribery, discrimination, corporate social good and what is bad in our
responsibility and fiduciary human conduct.
responsibilities.  It provides us of the common
Businesses must stand by some understanding of the universal,
principles. It should offer quality goods objective and irreversible moral
and services at sensible prices to principles that should govern our
consumers. human behavior and guide our
moral decisions.
It must also evade adulteration,  It opens a novel way of resolving
misleading advertisements and other moral problems and ethical
unfair malpractices. dilemmas affecting business
A business must also implement other transactions and the interactions
duties such as allocating fair wages, of people in the corporate world,
providing good working situations, not  The study of business ethics
abusing the workers, encouraging enhances the human and
competition, etc. interpersonal skills of managers
so they can be more effective in
managing the human side of
 According to Andrew Crane, organization.
“Business ethics is the study of
business situations, activities and
decisions where issues of right Businessmen’s Myths About Business
and wrong are addressed”. Ethics
 Raymond C. Bauhmart defines,  Businessmen are not immoral,
“The ethics of business is the and it would be disastrous to
 judge and conclude that business The essence of studying business
people commit unethical act in ethics is to provide the manager as a
doing business decisionmaker with a framework for the
 Business, certainly is a good and resolution of moral issues and problems
productive human activity. affecting business activities and the
However, it is the businessman’s organization itself.
wrong perception about the role
Moral reasoning is a process in
that ethics plays in the business
which ethics issues and problems are
world that affects the moral
benchmarked against moral standard so
judgment and decision making.
that a moral judgment is made possible.
The Relationship Between Ethics and
Business Principles of Business Ethics

Ethics plays an important role in The principles of business ethics

business. Without morality, business will are connected to social groups that
be a chaotic human activity. The concern include of consumers, employees,
of ethics as a philosophical science is to investors, and the local community. The
discover that there are unwritten laws, important rules or principles of business
written in the heart of man that should ethics are as follows –
govern our human conduct where positive
Avoid Exploitation of Consumers − Do
law may be absent, and in some cases are
not fraud and abuse consumer with
not clear.
measures such as artificial price rise and
adulteration.
The following are arguments that justify
Avoid Profiteering − Dishonest business
the significant role ethics plays in the
actions such as hoarding, black-
business world:
marketing, selling banned or harmful
 Business is an integral part of goods to earn exorbitant profits must be
human society. Therefore, the avoided.
actions of individuals and
Encourage Healthy Competition − A
institutions in business must be
well reasonable atmosphere that offers
subjected to moral rules and
certain profits to the consumers must be
moral evaluation.
encouraged
 In business, as in any other
human endeavor, “what is legal Accuracy − Correctness in weighing,
may not necessarily be moral”. packaging and quality of providing goods
People tend to be confused with to the consumers has to be followed.
legality and morality. An action
Pay Taxes Regularly − Taxes and other
may be legal but not necessarily
duties to the government must be fairly
moral.
and frequently paid.
 Law is insufficient.
Fair Treatment to Employees − Fair
Moral Reasoning in Business
wages or salaries, facilities and incentives
must be delivered to the employees.
  A good standard, when violated,
Keep the Investors Informed − The brings about feelings of guilt,
shareholders and investors must know shame and remorse of
about the financial and other important conscience.
choices of the company.
Requirements for a Good Moral
Avoid Injustice and Discrimination Judgment
− Evade all types of unfairness and
 It must be logical.
prejudice to employees. Judgment based
 It must be based on facts and
on gender, race, religion, language,
solid evidence.
nationality, etc. should be avoided.
 It must be based on sound and
No Bribe and Corruption − Do not give defensible moral principle.
expensive gifts, commissions and payoffs
The Morality of Profit Motive
to people having influence.
 Most people go to business to
Discourage Secret Agreement − Making
earn a living
secret agreements with other business
 Some people go to business for
people to influence production,
personal satisfaction
distribution, pricing etc. are unethical.
 Other people go to business
Service before Profit − Accept the because they want to serve the
principle of "service first and profit next." society through the goods and
services, they offer to customers
Fulfill Customers’ Expectations
 Other people go to business to
− Adjust your business activities as per
make a profit
the demands, needs and expectations of
the customers. The Good Side of Profit Motive

Respect Consumers Rights − Honor the  It motivates people to do

basic rights of the consumers something meaningful.
 It promotes ingenuity and
Accept Social Responsibilities − Honor
cleverness in running business.
responsibilities towards the society.
 It makes people productive.
 It generates potential capital for
Satisfy Consumers’ Wants − Satisfy the
the business.
wants of the consumers as the main
objective of the business. All business The Bad Side of Profit Motive
operations must have this aim.
 It promotes rivalry among
Characteristics of a Good Moral competitors
Standard  It makes people focus only on
making money
 It is one that looks at the issue as
 It turns the businessman from
something that is very serious.
being a reflective to a questioning
 It must be grounded on good
person because he only focuses
moral judgment.
his attention on the practical
 It should be objective.
activity of making money
  It promotes self-interest rather As a science, it is interested with the
than common good meaning of reality, including our human
experiences.
Ethical Considerations of Profit Motive
Business It is a science that seeks to explain the
ultimate cause of everything by the use of
 Earning profit is a good and valid
human reason alone.
activity in business
 Making excessive profits is To philosophize means to wonder about
totally wrong. life, to question reality and find sense in
 Profit is not the “be all” and “end what we do as human beings.
all” of doing business.
 Other Definitions of
 Pope Pius XI, was once quoted,
Philosophy:
“the Catholic Church does not
prohibit the producer from
According to Plato, “Philosophy
profiting provided, one respects
is the highest form of inquiry”.
the law of God, does not
 For William James, “Philosophy
prejudice the right of others, and
is a collective name for questions
work accordingly to faith and
that have not been answered to
right reason”.
the satisfaction of the one asking.
The Concept of Moral Responsibility  It is also defined as the science
that studies the ultimate causes of
Moral responsibility – accountability for
explanation of things trained by
the actions one performs and the
the use of human reason alone.
consequences they bring about, for which
a person could be justly punished or Being said, Business Ethics as an
rewarded. applied branch of Philosophy must be
discussed since it involves investigating
 It involves evaluation
the human values which are basically
 it is incurred only when a person
metaphysical in nature and which are
knowingly and freely acts in an
operative in fiduciary relationships both
immoral way or fails to act in
in business transactions and in the
moral way.
interactions of people in business
 Examples: helping a friend,
organizations and in the corporate world.
support a parent in old age.
Definitions of Ethics

 It is a practical science of the

Chapter 2. The Philosophical morality of human acts
Background of Business Ethics  It is the study conducted from the
standpoint of morality
Philosophy – from the Greek words,
 It is a practical science that
“philos” which means love and “sophis”
guides us in our actions that we
which means wisdom.
live rightly and well.
 It is the science which lays down
principles of right living.
Ethics and Morality

ETHICS
MORALITY
Descriptive

-Involves moral judgment based on

ethical norm or theory.
Ethics and morality are often used Ex. Stealing – “Should a man steal a drug
interchangeably. They mean the same to save his wife, or refrain from theft even
thing in casual conversations. However, though that would lead to his wife's
there is a distinction between them in death”
Philosophy.
Normative
Morality is the quality of goodness or
badness in human act. -It simply describes how people act and
does not prescribe how people should act.
It means conformity to the rules of the
right conduct. Ex. The Golden Rule
“We should do to others what we would
It implies judgment and refers to what we want others to do to us”
could call moral standards and moral
conduct while ethics is used to the formal Metaethics
study of those standards and conduct. For It simply analyses the usage of words.
this reason, Ethics is also often called It is a discussion of ethical theories and
“moral philosophy”. language.
Ethics involves the study of the standards Ex. “What is the meaning of ethical
and judgment people create. terms, such “good”, “right” and “should”?
Ethics assumes that the standards exist Deontological vs. Teleological
and seeks to describe them, to evaluate Approaches to Ethical Evaluation of
them or to evaluate the premises upon the Human Conduct
which those standards exist.
Deontological ethics or non-
Ethics, basically indicates the nature of consequentialist approach – measures
moral principles, ethical systems and and evaluates the nature of a moral act
moral norms that people use to justify based on the validity of the motive of an
their moral judgment. act. It states that an act that is not morally
Ethics as Normative Science - good can lead to something good.
information that is developed, presented Teleological ethics or consequentialist
or interpreted based on an assumed, approach – measures the morality of an
usually unstated, preference for a action based on its consequences and not
particular policy choice. in the motive or intention of the actor.
 ego is the realistic part that mediates
between the desires of the id and the
super-ego.

Kohlberg’s Theory of Moral

Development.

It is a theory that focuses on how children

develop morality and moral reasoning.
His theory suggests that moral
development occurs in a series of six
stages. It also suggests that moral logic is
primarily focused on seeking and
maintaining justice

The Moral Sense in Us

The Synthesis of Man According to St.

Thomas Aquinas – According to him, the
moral sense in man is manifested and
expressed in three ways:

 Man is able to distinguish or to

know what is good or what is
bad.
 Man is always obligated to do
good and to avoid evil.
 Man knows that he is accountable
for his actions – good or bad.

Freud’s Theory of the Id, Ego and the

Superego. According to Freud
psychoanalytic theory, the id is the
primitive and instinctual part of the mind
that contains sexual and aggressive drives
and hidden memories, the super-ego
operates as a moral conscience, and the