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Name : Muhammad Fathin Pangestu

Student Number/Class : 873082 / 73 D

Subject : Business Ethics

Assignment : Summary Chapter 1 – Basic Principles



Manuel G. Velasquez


1.1. The Nature of Business Ethics

Among all meanings, ethics can be understood as “the principles of conduct

governing an individual or a group” or the discipline on examining morality. Morality

itself is a normative standard that defines the good ones, and the evil ones. This idea

shapes the standard of norms that determine the value of human’s action in certain

phenomenon. Sets of norm and moral value might be different one to each other since

it depends on the background of the people who share the idea. Typically, the norms

and moral values originated from several environment such as family, friends, culture,

experience and education which might be unique on every sociological and

topographical background. However, in global scheme, there are so much norms and

moral values that are agreed by the major society.

Moral standards can be distinguished into two kinds: moral norms and nonmoral

norms (conventional norms). Although it is difficult to differentiate both of the norms,

the conventional norms fundamentally does not include the moral value. It tends to be
driven by the etiquette that judge what is right or wrong with the principle of modesty


There are six characteristics that ease people to define the nature of moral

standards. The first point is moral standards should involve serious wrongs or

significant benefits for human beings. Second, moral standards should be preferred to

other values including self-interest. Third, Moral standards are also not kinds of

nonmoral values that are designated by authorities or certain figures. Fourth, Moral

standards tend to be a universal value that is accepted by majority. Fifth, it must be

based on impartial considerations. And Sixth, it is associated with special emotions and

special vocabulary.

All moral standards that are surrounding the society are subsequently examined

by ethics. It examines those moral standards, whether those are reasonable to be

applicated or not in a normative perspective.

In business, there are also ethics that are particularly designated for a business

environment. Business ethics concentrates the scope on moral standards that are applied

to business environment in 3 types of level: systemic, questioning the social, political,

legal or economic systems within which companies operate; corporate, questioning

particular corporation and its policies, culture, climate, impact, or actions, and;

individual issues, questioning about a particular individual’s decisions, behavior, or

character. However, there are some complexity arise in terms of the perception whether

moral notions be applied on corporations or individuals are the only real moral agents.

Two views occur in response toward the complexity. First point of view sees

that if there is something acts intentionally, it can be considered as “moral agent”,

whose has moral rights and obligations as how human beings have it. The other view

sees that companies could not be determined as “morally responsible” or technically

have no moral duties, no more than an instrument driven by formal rules. After all, it is

definitely difficult to tell one or two is either the correct one or the wrong one or even

both of them are not correct.

Business ethics are also not spared from debates. There are some arguments

about how business ethics are not significantly needed. The argument stated that the

pursuit of profit will ensure the maximum social benefit in free market economy.

Another view stated that the most important obligation for the managers is loyalty

rather than ethics, and there is a view that argue if the company obey the law therefore

all required ethics is done as well.

At the other side, there are also arguments that support the existence of ethics

in business, because ethics are including all human activities, business is not an

exception. Customers, employees, and people in general are part of ethics and care

about ethics. They also argue that ethics is consistent with profit seeking. Moreover,

studies suggest ethics does not detract from profits and seems to contribute to profits.

Besides debates about the existence of ethics in business, companies have a

typical societal obligation named Corporate Social Responsibility – will be abbreviated

as CSR – which often perceived as part of business ethics. Both of those terms are

related yet different. Although CSR is – on a mission basis – a company obligation to

involve and contribute on social project, Friedman’s view that CSR is a mean to

maximize profit for shareholders. However, business ethics is both part of CSR and

part of the justification for CSR.

1.2. Ethical Issues in Business

The development of technology inevitably influence the business environment,

including the ethics and issues within the environment. The information technology

where all data and information are easily computed and filed on digital devices turns
out into possibility of manipulation and leak, enhance the risk, property and privacy

rights issues.

The globalization that provides almost borderless connection for all society

including economics system is also blamed for many rising inequality, cultural losses,

and exploitation towards developing countries. In other hand, globalization which

decrease the border for development of multinational company still leaves dilemma for

manager in dealing with differences between company standards with existing local

law and customs. The ethical relativism is also another issue that must be dealt, where

there are no exact standards for any ethics that could be applied at all kind of conditions.

Therefore, it depends on the culture that relatively accept in the area. Despite the diverse

of law and culture, corporation can uses hyper-norms, known as moral standards that

applies in all societies, as main moral standards rather than the micro-social norms.

1.3. Moral Reasoning

Moral values are basically formed by the experiences, start from childhood

where the family teach the value, and so on until an individual get personal experience

other atmospheres. The experience shapes personal perception, judgement, and ability

to deal with moral issue.

To ease the understanding, these are the classification Moral Development by


a. Level one: pre-conventional stages

There are 2 stages within this level, the first is punishment and obedience

orientation, which educate an individual the consequences of an act, which

later defines what is right and wrong. Second, instrumental relative

orientation, this stage educate an individual to aware of each other’s needs

and how to behave the right way to achieve it.

b. Level two: conventional stages

There are 2 stages within this level, the first stage is interpersonal

concordance orientation, an education for a good behavior to the expectation

of those for whom the person feels loyalty, affection and trust. The second

stage is law and order orientation, this stage is based on loyalty to a nation

or society, obeying the law and norms that runs within society itself.

c. Level three: post-conventional stages

There are 2 stages within this level, the first stage is social contract

orientation, which an individual become aware that people have conflicting

moral views but believes there are fairs ways of reaching consensus about

it. The second is universal oral principles orientation, where right action

comes to be defined in terms of moral principles chosen because they are

reasonable, universal, and consistent.

Although Kohlberg’s theory somehow correct in identifying the level and stages

of moral development. Gilligan views that female’s moral development is absent. Then

she carried out new principles which includes the “missing” part. She stated that for

women, morality is primarily a matter of caring and being responsible. The

development reflects on how a women start caring and being responsible, of other

person more than herself. In conventional stage, a women caring and being responsible

for others to the neglect of herself, meanwhile in the postconventional stage a women

achieving balance between caring other and herself.