ETHICS

AND
BUSINESS

CHAPTER ONE

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 WHAT DOES ETHICS MEAN TO
YOU?
The meaning of “ethics” is hard to pin down, and the
views many people have about ethics is shaky.
• Many people tend to equate ethics with their
feelings. But being ethical is clearly not a matter of
following one’s feelings. In fact, feelings
frequently deviate from what is ethical.

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• Nor should one identify ethics with religion. Yet if

ethics were confined to religion, then ethics would
apply only to religious people. But ethics applies as
much to the behavior of the atheist as to that of the
saint. Ethics, however cannot be confined to religion
nor is it the same as religion.
• Being ethical is also not the same as following the
law. Laws, like ethics, can deviate from what is
ethical.
 Continued……..
• Being ethical is also not the same as doing
“whatever society accepts.” Standards of behavior
in society can deviate from what is ethical. An entire
society can become ethically corrupt (e.g. Nazi
Germany). If being ethical were doing whatever
society accepts, one would have to find an
agreement on issues which does not, in fact, exist.

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 WHAT, THEN, IS ETHICS ?
If ethics does not mean all these things then what
is ETHICS ?
 ETHICS: Knowledge
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• Ethics comes from the Greek word ‘Ethos’ – moral

character or custom.
• The word ‘ethics’ refers to principles of behavior that
distinguish between good & bad; right & wrong. It is a
person’s own attitude & beliefs concerning good behavior.
Ethics reside within individuals & as such are defined
separately by each individual in his own way.
• It means character, norms, morals, ideas prevailing in a
group.
• Ethics are principles of personal & professional conduct.
 Continued…..
• Ethics refers to code of moral principles & values that
govern the behavior of a person or group with respect to
what is right or wrong.
• Ethics is the discipline that examines one's moral standards
or the moral standards of a society. It asks how these
standards apply to our lives and whether these standards are
reasonable or unreasonable—that is, whether they are
supported by good reasons or poor ones.

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 Continued…..
• Ethics is the study of moral standards—the process of
examining the moral standards of a person or society
• The ultimate aim of ethics is to develop a body of moral
standards that we feel are reasonable to hold—standards
that we have thought about carefully and have decided are
justified standards for us to accept and apply to the choices
that fill our lives

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ETHICS IS BASICALLY TWO THINGS:

• First, ethics refers to well based standards of right and

wrong that prescribe what humans ought to do, usually in
terms of rights, obligations, benefits to society, fairness, or
specific virtues. Ethics refers to those standards that impose
reasonable obligations to refrain from rape, stealing,
murder, assault, slander, and fraud. Ethical standards also
include those that enjoin virtues of honesty, compassion,
and loyalty. And, ethical standards include standards
relating to rights, such as right to life, the right to freedom
from injury, and the right to privacy. Such standards are
adequate standards of ethics because they are supported by
consistent and well founded reasons.
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• Secondly, ethics refers to the study and development

of one’s ethical standards. As, feelings, laws, and
social norms can deviate from what is ethical. So it
is necessary to constantly examine one’s standards
to ensure that they are reasonable and well-founded.
Ethics also means, then, the continuous effort of
studying our own moral beliefs and our moral
conduct, and striving to ensure that we, and the
institutions we help to shape, live up to standards
that are reasonable and solidly based.
VALUES MORALS

ETHICS
 DIFFERENCES BETWEEN
VALUES, MORALS AND ETHICS:
VALUES are the rules MORALS have a greater ETHICS: you can have
by which we make social element to values professional ethics, but
decisions about right and and tend to have a very you seldom hear about
wrong, should and good acceptance. Morals professional morals.
shouldn’t, good and bad. are far more about good Ethics tend to be codified
They also tell us which and bad than other values. into a formal system or
are more or less We thus judge others set of rules which are
important, which is more strongly on morals explicitly adopted by a
useful when we have to than values. A person can group of people. Ethics
trade off meeting one be described as immoral, are thus internally
value or another. Values yet there is no word for defined and adopted,
are beliefs of a person or them not following whilst morals tend to be
social group in which values. Morals are externally imposed on
they have an emotional motivation based on ideas other people.
investment. of right and wrong.
Morality: The standards that
an individual or a group has
about what is right and
and wrong or good and evil.
Moral Standards: The
norms about the kinds of
actions believed to be
morally right and wrong as
well as the values placed on
the kinds of objects believed
to be morally good and
morally bad.
Nonmoral standards: The
standards by which we
judge what is good or bad
and right or wrong in a
nonmoral way.
MORALITY
Where do these standards come from?
-Family
-Friends
-Various societal influences (church, school,
magazines, TV, music, and associations)
-Experience, Learning, Intellectual development
may lead the maturing person to revise these
standards
-Through the maturing process the person may
develop standards that are more intellectually
adequate and so more suited for dealing with
the moral dilemmas of adult life.
We do not always do what we believe is morally
right nor do we always pursue what we believe is
morally good.
 MORALITY AND ETHICS
• Ethics and Morality have something to do with the
concepts of good and bad.
• The meanings of the terms “ethics” and “morality” can be
differentiated based on their origins in ancient Greek and
Latin, respectively
• Greeks – philosophers, Romans – builders
• Greeks often have meanings that are primarily philosophical
study, while the Latin derived words imply “doing the
thing.”
• Ethics comes from the Greek word Ethos – moral character
or custom. Morality comes from the Latin word Moralis –
custom or manner.
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• Both words deal with the customs or the manner in which

people do things.
• Their modern meanings relate to the way people
act – either good or bad
• Morality, strictly speaking, is used to refer to what we
would call moral conduct or standards.
• Morality is looking at how good or bad our conduct is, and
our standards about conduct. Ethics is used to refer to the
formal study of those standards or conduct.
Ethics is “the study of morality.”
Morality is the subject matter that ethics investigates
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• One refers to the study of conduct as moral philosophy,

but that is less common than just saying “ethics”. Hence
in most colleges, there is an ethics class, rather than one
named “morality.”

One might say that morality is ethics in action, but the two
terms can be used interchangeably.
 TYPES OF STUDY OF ETHICS:
The study of ethics or moral philosophy can be
divided into three broad areas:
• Descriptive Study
• Normative Study
• Analytical Study (or Metaethics)

Although ethics is a normative study of ethics, the social

sciences engage in a descriptive study of ethics.
 Descriptive Study

• Descriptive ethics is simply describing how people

behave.
• Descriptive ethics lets us see if we “walk the walk.”
• A descriptive study is one that does not try to reach any
conclusions about what things are truly good or bad or
right or wrong. Instead, a descriptive study attempts to
describe or explain the world without reaching any
conclusions about whether the world is as it should be.
 Normative Study

• Normative ethics tries to establish norms or typical

appropriate behaviors people should perform. One
should be honest, in the language of ethics, this is
called “veracity.” Fairness or Justice is another
norm
• A normative study is an investigation that attempts
to reach normative conclusions—that is, conclusions
about what things are good or bad or about what
actions are right or wrong. In short, a normative
 Analytical Study (or Metaethics)
• Metaethics often looks at how people determine for
themselves what norms to follow.
• There are many sources or determinants of people’s
personal ethical beliefs:
- Parents
- Teachers
- Religion (e.g. The Ten Commandments)
- Peers
- Culture
- Media
- Moral Self Reflection
ROLE OF GUILT AND FEAR IN ETHICS
• Some maintain their conduct within accepted ethical norms
because of the fear of getting caught. These people often do
whatever they think that they can “get away with.” if they
know they are not being watched and are unlikely to get
caught, they will violate almost any ethical norm.
• Guilt, on the other hand, is the motivator of honest people.
Their decision to comply with ethical norms is NOT based
on whether they will get caught, but because they will know
that they did something they think is wrong. Sociopaths do
not feel guilt because they do not believe their actions are
wrong.
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WHAT, THEN, IS BUSINESS
ETHICS ?
If ethics is all these things, then what is
BUSINESS ETHICS ?
 BUSINESS ETHICS
• Application of moral principles to business
problems.
• According to Carter Macnamara, “Business ethics is
generally coming to know what is right or wrong at the
work place & doing what is right. This is in regard to
products, services & in relationships with stakeholders. It is
sensitizing the managers at the work place about how they
should act so that they hold some kind of moral compass,
which always tells you the direction in terms of where to go.
• Business ethics is a specialized study of right and wrong
applied to business policies, institutions, and behaviors.
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• 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.
• It is a study of moral standards and how these apply
to the social systems and organizations through
which modern societies produce and distribute
goods and services and to the behaviors of the
people who work within these organizations.
Business Ethics in other words, is a form of Applied Ethics
Importance of Ethics in Business:
Ethical considerations in business are important to managers
as individual’s personal life & business life cannot be neatly separated
with respect to moral judgments. Importance of ethics can be explained
in the following explanations, namely
• For the individual, job is the centre of life & its values must be in
harmony with the rest of life, if he is to be a whole & healthy
personality.
• This is an industrial society & its values tend to become those of the
entire culture.
• If an organization does not behave in accordance with the social
system’s expectations, it might not merely lose its market share of
face another piece of legislated control but might lose its very right to

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 OBJECTIVES OF BUSINESS ETHICS
Two folds objective of business ethics:
1) It evaluates the human practices by calling upon
moral standards.
2) To give prescriptive advice on how to act morally
in specific situations.

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 BENEFITS OF BEING ETHICAL IN
BUSINESS
According to Carter Macnamara the benefits of
managing ethics in an organization are:
• It improves the society.
• It helps to maintain moral standards in turbulent
times i.e. when you are in a dilemma, often called as
“Ethical Dilemma.”
Ethical Dilemma is a situation that arises when all alternative
choices or behaviors have been deemed undesirable because of
Potentially negative consequences making it difficult to
distinguish right from wrong.
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• It also cultivates strong team work in the organization

• It aligns employee behavior with the ethical values
• It helps to support employee growth
• It also serves as an insurance policy (person is insured
against going the wrong way.)
• It helps to avoid criminal omissions & commissions
• It helps to improve the public image of the organization
• Unethical companies have a tough time in hiring and
retaining talent
• Employees want to work in an ethical and socially
responsible organization.
 3 C’s OF BUSINESS ETHICS
• It is related with Compliance
• It is related with Contribution
• It is related with Consequences

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 MYTHS ABOUT BUSINESS
ETHICS
• Myth: Business Ethics is more a matter of
religion than management.
Truth: Business Ethics is more a matter of management
• Myth: Employees are ethical so we don’t need to pay
attention to Business Ethics.
Truth: Most managers face complex ethical dilemma at
workplace.
• Myth: Ethics is a personal or individual matter and not a
public matter.
Truth: Ethics is a publicly debatable matter, a public affair
and not an individual or a personal affair.
Continued…..
• Myth: Business and Ethics do not mix.
Truth: Business and Ethics go hand in hand.
• Myth: Ethics in business is relative. (Ethical Relativism)
Truth: There are absolute things that exist in ethics.
• Myth: Good Business means good Ethics
Truth: It is not necessary that a business doing good is
ethical as well.
• Myth: Information and Computing are amoral
Truth: Information should not be misleading and accuracy
has to be maintained in the technology being used.
 THREE ISSUES IN BUSINESS
ETHICS
Though business ethics cover a variety of topics,
there are three basic types of issues:

Systemic Issues Corporate Issues Individual Issues

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 Systemic Issues
Questions raised about the economic, political,
legal, or other social systems within which
businesses operate. These include questions
about the morality of capitalism or of the laws,
regulations, industrial structures, and social
practices within which businesses
operate.

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 Corporate Issues
Questions raised about a particular company.
These include questions about the morality of
the activities, policies, practices, or
organizational structure of an individual
company taken as a whole.

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 Individual Issues
Questions about a particular individual within
an organization and their behaviors and
decisions. These include questions about the
morality of the decisions, actions, or character
of an individual.

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• Some theorists maintain that moral notions apply only to

individuals, not to corporations themselves
• Others counter that corporations do act like individuals,
having objectives and actions, which can be moral or
immoral just as an individual's action might be.
• Perhaps neither extreme view is correct. Corporate actions
do depend on human individuals who should be held
accountable for their actions. However, they also have
policies and culture that direct individuals, and should
therefore be held accountable for the effects of these
corporate artifacts.
• Nonetheless, it makes perfectly good sense to say that a
corporate organization has moral duties and that it is
morally responsible for its acts.
 ETHICAL RELATIVISM
When faced with the fact that different cultures have
different moral standards, the managers of some
multinationals have adopted the theory of Ethical
Relativism.
• Ethical relativism is the theory that, because different societies have
different ethical beliefs, there is no rational way of determining
whether an action is morally right or wrong other than by asking
whether the people of this or that society believe it to be right or
wrong . In fact, the multiplicity of moral codes demonstrates that
there is no one "right" answer to ethical questions. The best a
company can do is follow the old adage, "When in Rome, do as the
Romans do." In other words, there are no absolute moral standards.
Criticisms of Ethical Relativism
Theory:

• Critics of ethical relativism point out that it is illogical to assume that

because there is more than one answer to an ethical question that both
answers are equally correct─ or even that either answer is correct.
• The late Philosopher James Rachels put the matter quite succinctly:
The fact that different societies have different moral codes proves
nothing.
He concluded that in some cultures people are better informed than in
others. Similarly, disagreement in ethics might signal nothing more
than that some people are less enlightened than others.
At the very least, the fact of disagreement does not, by itself, entail that
truth does not exist.
Criticisms continued………

• However, the most telling criticisms of the theory point out that it has
incoherent consequences. For example, it becomes impossible to
criticize a practice of another society as long as members of that
society conform to their own standards. How could we maintain that
Nazi Germany or pre-Civil War Virginia were wrong if we were
consistent relativists? There must be criteria other than the society's
own moral standards by which we can judge actions in any particular
society.

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 MORAL DEVELOPMENTS
As people mature, they change their values in very
deep and profound ways. Just as people's physical,
emotional, and cognitive abilities develop as they age,
so also their ability to deal with moral issues develops
as they move through their lives.
Lawrence Kohlberg has identified six stages in the process
of moral development (in three levels)

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LEVEL ONE: Pre – Conventional Stages
1. Punishment and Obedience Orientation
2. Instrument and Relativity Orientation

LEVEL TWO: Conventional Stages

1. Interpersonal Concordance Orientation
2. Law and Order Orientation

LEVEL THREE: Post – Conventional, Autonomous or

Principled Stages
1. Social Contract Orientation
2. Universal Ethical Principles Orientation
Level One: Pre – Conventional Stages
1. Punishment and Obedience Orientation - At this stage, the
physical consequences of an act wholly determine the
goodness or badness of that act. The child's reasons for
doing the right thing are to avoid punishment or defer to
the superior physical power of authorities. There is little
awareness that others have needs similar to one’s own.
2. Instrument and Relativity Orientation- At this stage, right
actions become those that can serve as instruments for
satisfying the child’s own needs or the needs of those for
whom the child cares.
At these first two stages, the child is able to respond to rules
and social expectations and can apply the labels good, bad,
right, and wrong.
Level Two: Conventional Stages
1. Interpersonal Concordance Orientation - Good behavior at
this early conventional stage is living to the expectations
of those for whom one feels loyalty, affection, and trust,
such as family and friends. Right action is conformity to
what is generally expected in one's role as a good son,
daughter, brother, friend, and so on.
2. Law and Order Orientation - Right and wrong at this more
mature conventional stage now come to be determined by
loyalty to one's own larger nation or surrounding society.
Laws are to be upheld except where they conflict with
other fixed social duties.
Maintaining the expectations of one's own family, peer group, or
nation is now seen as valuable in its own right, regardless of the
consequences.
Level Three: Post - Conventional Stages
1. Social Contract Orientation - At this first post-
conventional stage, the person becomes aware that people
hold a variety of conflicting personal views and opinions
and emphasizes fair ways of reaching consensus by
agreement, contract, and due process.
2. Universal Ethical Principles Orientation - At this final
stage, right action comes to be defined in terms of moral
principles chosen because of their logical
comprehensiveness, universality, and consistency.
At these stages, the person no longer simply accepts the values and
norms of the groups to which he or she belongs. Instead, the person
now tries to see situations from a point of view that impartially takes
everyone's interests into account.
 Criticisms of Kohlberg’s Theory:
• Kohlberg's own research found that many people remain
stuck at an early stage of moral development. His structure
implies that later stages are better than the earlier ones.
Kohlberg has been criticized for this implication, and for
not offering any argument to back it up.
• Carol Gilligan, a feminist psychologist, has also criticized
Kohlberg's theory on the grounds that it describes male and
not female patterns of moral development. Gilligan claims
that there is a "female" approach to moral issues that
Kohlberg ignores.

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 Criticisms Continued……...
• Both Gilligan and Kohlberg agree that there are stages of
growth in moral development, moving from a focus on the
self through conventional stages and onto a mature stage
where we critically and reflectively examine the adequacy
of our moral standards. Therefore, one of the central aims of
ethics is the stimulation of this moral development by
discussing, analyzing, and criticizing the moral reasoning
that we and others do, finding one set of principles "better"
when it has been examined and found to have better and
stronger reasons supporting it.

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 MORAL REASONING
Moral reasoning refers to 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 always involves two essential
components:
(a) an understanding of what reasonable moral
standards require, prohibit, value, or condemn; and
(b) evidence or information that shows that a particular
person, policy, institution, or behavior has the kinds of
features that these moral standards require, prohibit,
value, or condemn.
 Continued…….

To evaluate the adequacy of moral reasoning,

ethicists employ three main criteria:
1. Moral reasoning must be logical.
2. Factual evidence must be accurate, relevant, and
complete.
3. Moral standards must be consistent.

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MORAL RESPONSIBILITY
AND BLAME
• Moral responsibility can refer to two different but related things:
• First, a person has moral responsibility for a situation if that person
has an obligation to ensure that something happens.
• Second, a person has moral responsibility for a situation when it
would be correct to morally praise or blame that person for the
situation.
• People who have moral responsibility for an action are usually
called moral agents. Agents are creatures that are capable of
reflecting on their situation, forming intentions about how they will
act, and then carrying out that action.

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 Continued………
• Moral responsibility is directed not only at judgments concerning
right or wrong. Sometimes, they are directed at determining whether a
person or organization is morally responsible for having done
something wrong. People are not always responsible for their
wrongful or injurious acts: moral responsibility is incurred only when
a person knowingly and freely acts in an immoral way or fails to act
in a moral way.
• Ignorance and inability to do otherwise are two conditions, called
excusing condition, that completely eliminate a person's moral
responsibility for causing wrongful injury. Ignorance and inability do
not always excuse a person, however. When one deliberately keeps
oneself ignorant to escape responsibility, that ignorance does not
excuse the wrongful injury.
 Continued………

A person is morally responsible for an injury or a wrong if:

1. The person caused or helped cause it, or failed to prevent it

when he could and should have;
2. The person did so knowing what he or she was doing;
3. The person did so of his own free will.

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 Continued………

Ignorance may concern the relevant facts or the relevant moral

standards. Generally, ignorance of the facts eliminates moral
responsibility. This is because moral responsibility requires
freedom, which is impossible in the case of ignorance of the
relevant facts. Inability eliminates responsibility because a
person cannot have a moral obligation to do something over
which he or she has no control.

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 Continued………

A person is NOT morally responsible for an injury

or a wrong if
1. The person did not cause and could not prevent the injury
or wrong;
2. The person did not know he was inflicting the injury or the
wrong;
3. The person did not inflict the injury or the wrong of his
own free will

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 ARGUMENTS FOR AND AGAINST
BUSINESS ETHICS
Business Ethics is a process of rationally evaluating our moral
standards and applying them to business situations. However,
many people have raised objections to the very idea of
applying moral standards to business activities.
People object to the entire notion that ethical standards
should be brought into business organizations.
 Continued…….
They make three general objections:
• First, they argue that the pursuit of profit in perfectly
competitive free markets will, by itself, ensure that the
members of a society are served in the most socially
beneficial ways.
• Second, they claim that employees, as "loyal agents," are
obligated to serve their employers single-mindedly, in
whatever ways will advance the employer's self-interest.
• Third, they say that obeying the law is sufficient for
businesses and that business ethics is, essentially, nothing
more than obeying the law.
 Continued…….
Arguments for bringing ethics into business:
• One argument points out that since ethics should govern all
human activity, there is no reason to exempt business
activity from ethical scrutiny. Business is a cooperative
activity whose very existence requires ethical behavior.
• Another more developed argument points out that no
activity, business included, could be carried out in an ethical
vacuum.
• Another argument claims that ethical companies are more
profitable than other companies
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