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Business Ethics

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David F Amakobe
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Running heads: BUSINESS ETHICS

Business Ethics

David F Amakobe, MBA

African Leadership Institute

Wilmington

Delaware
Business Ethics Page |2

Contents
Author’s note ................................................................................................................................................ 3

Abstract ......................................................................................................................................................... 4

Ethics ............................................................................................................................................................. 5

Ethical Theories ............................................................................................................................................. 5

Figure 1: Decision Ethical Matrix .................................................................................................................. 8

Measuring Ethics ........................................................................................................................................... 9

Importance of Ethics in Business .................................................................................................................. 9

Influence of Ethics on Leaders and Followers............................................................................................. 11

Personal Experience .................................................................................................................................... 13

Application .................................................................................................................................................. 14

Recommendations ...................................................................................................................................... 14

Conclusion ................................................................................................................................................... 14

References .................................................................................................................................................. 16

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Business Ethics Page |3

Author’s note
This paper was written as part of the DBA coursework at Colorado Technical University

for BADM840-1603C-01 Business Legal and Ethical Environment. The course was facilitated

by Professor Michael Alexander, DM. on 24 October 2016. The author posted it on Research

Gate and on 23rd September 2017 had over 5682 reads. The majority of the readers were

undergraduate business students from around the world. The feedback from these students, Dr.

Butt and Oksana Chernykh, encouraged the revision to make improvements that make the paper

more readable and beneficial. Butt (2017) writing on the comments suggested that the paper

could be improved by describing two or three ethical theories such as consequential, non-

consequential and virtue theories (Butt, 2016). He further suggested the inclusion of Business

theories such as stakeholders’ management theory, the concepts of Corporate Social

Responsibility and sustainability that would add more critical thinking. Lastly, the feedback

asked for the fresh writing of both conclusion and recommendations. Oksana Chernykh (2017) in

her comments required clarification on the concept, construction, and use of the Decision Ethics

matrix. This revision of the article has sort to incorporate these feedback in this revision; the

author is grateful to the readers and to those who took the time to write back. Any errors and lack

of fit in the final paper is entirely the responsibility of the author.

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Business Ethics Page |4

Abstract
The original purpose of this article was to define ethics and critically examine its importance in

business. In the process, the author researched several peer-reviewed articles on the issue of

ethics in business. The author then shared some thoughts on how applying ethical standards

affects both corporate leaders and their followers. The author further considered and discussed

the strengths and weaknesses of applying ethical standards in the workplace. The purpose of the

article evolved to include various ethical theories and how they are applied in concepts like

corporate social responsibility, sustainability and balanced scoreboards in organizations. In the

paper, the author shares personal or professional experiences that are appropriate. The final

product is a paper aiming to provide a review of ethics in business, the measurement of ethical

standards and the application of ethical practices in organizations. The study consisted of the

review of the literature on ethics in business. In line with the principle that one can only manage

what they can measure, the author used the literature to create the Decision Ethics Matrix (DEM)

that provides a system of measuring the ethical level of decisions, proposals, rules, and

regulations.

Keywords: Ethics, Business, DEM, Standards, Corporate Leaders, Followers, Experience

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Ethics
Ethics is the branch of philosophy that deals with values relating to human conduct.

Specifically, that human conduct that deals with the rightness and wrongness of certain actions

and the goodness and badness of the motives and outcomes of such actions (Velasquez, Andre,

Thomas Shanks, & Meyer, 2017). This paper defines ethics as a person's situation-dependent

application of moral standards, which stem from the traditions, values or beliefs that have grown

in societies concerning right and wrong conduct (Müller, Turner, Andersen, & Shao, 2014).

Ethical Theories
There are five lenses through which people can view moral issues. The first lens is that

which considers the greatest balance of good over evil; this perspective accepts that every moral

situation or dilemma presents both advantages and disadvantages. This lens is known as the

Utilitarian ethical theory or approach. In this perspective, the ethical course of action is one that

creates the greatest balance of good. The challenge here is that what is good for one person;

organization or culture may be evil to another. The theory holds that the ethical action is the one

that provides the greatest good for the greatest number (Velasquez, Andre, Shanks, & Meyer,

2015). The Classical Utilitarians; Jeremy Bentham and John Stuart Mill, held that we ought to

maximize the good, that is, bring about ‘the greatest amount of good for the greatest number.'

The consequentialism theory holds that outcomes and how their distribution matter.

The second ethical lens that moral issues may be views through is based on the

philosophy that people have dignity based on their ability to choose what they will do with their

lives freely. Secondly, that people have a fundamental moral right to have these choices

respected provided their choices do not infringe on the rights and choices of others. This theory

holds that every person has a right to be treated as a whole and to be provided with the truth,

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Business Ethics Page |6

privacy, safety, and fidelity. In this Rights theory, an action is ethical if it respects the moral

rights of everybody.

The third ethical lens is based on Aristotle’s philosophy which states that equal shall be

treated equally and unequal should be treated unequally. This third lens defines the concepts of

favoritism and discrimination which it uses as metrics to measure the ethical nature or otherwise

of an action or inaction (Hayibor, 2017). The Fairness or justices theory states that favoritism

gives advantages to a select few without a justifiable reason for singling them out. It posits that

discrimination imposes disadvantages on people who are no different from those on whom they

are not imposed. It, therefore, concludes that both favoritism and discrimination singly and

jointly are wrong, unfair and unjust hence unethical.

Fairness and justice are core issues in leadership Stakeholder theory. This theory posits

that a stakeholder’s inclination to cooperate or sanction a firm is a function of their perception of

the fairness or unfairness of the treatment they receive from the firm (Hayibor, 2017).

Practitioners and researchers have observed that Fairness or justice may be distributive,

procedural or intersectional (Kim, Lin, & Leung, 2015). Ethical challenges can, therefore, arise

in the actions or inactions of distribution of outcomes, in the process of the distribution or and in

the interpersonal relations between authority figures and the people.

The fourth ethical lens is based on the assumption that the destiny of humanity is joined

and the individual’s good is inextricably linked to the good of their community. The common-

good theory assumes that the individuals are bound by the pursuit of common community goals

and values. An action or inaction is taken to be ethical if it conforms to societal values,

assumptions, beliefs, and expectations (Macias, 2016). The common good is linked to societal or

organizational culture, and care must be taken to ensure that others who could be affected are

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Business Ethics Page |7

taken into consideration. This lens results in the Duty Ethics or Kantian Ethics where the

emphasis is placed to adhering to ethical principles or duties and fulfillment of obligations to

fellow humans. The moral value of an action or inaction is determined by motive or intent, not

the outcomes. Through this ethical lens, actions or inactions are determined by reason, not

emotion. This community theory is seen in the stakeholder theory in corporate management,

where the corporate leadership is expected to take into consideration the effects of their decisions

on more people than the shareholders (Amakobe, 2016; Hecht & Fiksel, 2015; Müller et al.,

2014).

The fifth ethical theory assumes that there exist certain basic human ideals discovered

through a study which provides for a full development of humanity that all humanity should

strive to achieve. These basic human ideals are called virtues. These virtues are courage,

compassion, generosity, fidelity, integrity, fairness, self-control, prudence and honesty

(Velasquez et al., 2015). Virtues Ethics emphasizes the role of a character and the virtues that

one embodies in the evaluation or determination of ethical behavior.

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Decision Ethics Matrix ®

Organization, Entity, Person, Contemplated Law, Policy,

Enron
Procedure, Practice, Action or Inaction being rated

Stakeholders (Interested parties) US Citizens, EU, Employees, Stock Exchanges, Securities Commission

SCORE (CHOOSEN
Ethical Lenses RATINGS - CHOOSE ONE PER ROW
RATING)

The utilitarianism of Mill and Creates the greatest

9 18 27 36 45 9
Bentham balance of good
Truth 2.25 4.5 6.75 9 11.25 2.25
The ethics of Locke's freedom Privacy 2.25 4.5 6.75 9 11.25 2.25
(Rights) Safety 2.25 4.5 6.75 9 11.25 2.25
Fidelity 2.25 4.5 6.75 9 11.25 2.25
The ethics of Aristotle's Favoritism 4.5 9 13.5 18 22.5 4.5
justice Discrimination 4.5 9 13.5 18 22.5 4.5
The ethics of Kant's debt Obligations to fellow
9 18 27 36 45 9
(Common Good) Humanity
Honesty 1 2 3 4 5 1
Courage 1 2 3 4 5 1
Compassion 1 2 3 4 5 1
Generosity 1 2 3 4 5 1
The ethics of virtue of
Intergrity 1 2 3 4 5 1
Aristotle
Fairness 1 2 3 4 5 1
Fidelity 1 2 3 4 5 1
Self-Control 1 2 3 4 5 1
Prudence 1 2 3 4 5 1
1 2 3 4 5 1
Very Perfectly
Unethical Boarderline Ethical Very Unethical
Unethical Ethical
To use this instrument to measure the ethics of an entity, Stature, Procedure, action or inaction fill the field for the entity and identify all
stakeholders. The scles are modified Likert scales. Each Ethical lense has nine (9) as the lowest for "very unethical" through forty five (45)
as "perfectly ethical". The lowest scale nine originates from the fact that "the ethics of virture of Aristotle" has nine components each
with one as the lowest and five as the highest. The user goes down the lenses and their components assigning a rating. The Ratings are
summed up then divided by 45. A final rating of one and under is very unethical, above one to two is unethical, above two to three is
boarderline, above three to four is Ethical, and finally above four is Perfectly ethical.
© 2016 African Wood Inc

Figure 1: Decision Ethical Matrix

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Business Ethics Page |9

Measuring Ethics
The matrix in Figure 1 provides a system of measuring the ethical level of decisions,

proposals, rules, and regulations. The Decision Ethics Matrix ® forces decision makers to

critically review decisions through all five ethical lenses. The ethics or lack of them is ranked on

a modified Likert scale, giving scores ranging from very unethical to perfectly ethical. The

Matrix is developed by modifying the Likert scale. The matrix uses the five lenses of ethical

perception: The utilitarianism of Mill and Bentham, The ethics of Locke's freedom (Rights), the

ethics of Aristotle's justice, the ethics of Kant's debt (Common Good), and the ethics of virtue of

Aristotle.

The instrument is shown in Figure 1, is used to measure the ethics of an entity, Stature,

Procedure, action or inaction, by filling the field for the entity and identify all stakeholders. The

scales are modified Likert scales. Each Ethical lenses has nine (9) as the lowest for "very

unethical" through forty-five (45) as "perfectly ethical." The lowest scale nine originates from

the fact that "the ethics of virtue of Aristotle" has nine components each with one as the lowest

and five as the highest. The user goes down the lenses, and their components are assigning a

rating. The Ratings are summed up then divided by 45. A final rating of one and under is very

unethical, above one to two is unethical, above two to three is borderline, above three to four is

Ethical, and finally above four is Perfectly ethical.

Importance of Ethics in Business

Business ethics is a form of applied ethics that examines ethical principles and moral or

ethical problems that arise in the business environment (Warren, 2011). It applies to all aspects

of business conduct. It is relevant to the conduct of individuals and business organizations as a

whole. It's part of Applied Ethics, a field of ethics that deals with ethical questions in many areas

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Business Ethics P a g e | 10

such as medical, technical, legal and business. The range and quantity of business ethical issues

reflect the degree to which business is perceived to be at odds with non-economic social values

(Enderle & De George, 2014; Müller et al., 2014). Business ethics is both a normative and a

descriptive discipline (Enderle & De George, 2014; Hayibor, 2017). As a corporate practice and

a career specialization, the field is primarily normative. In academia, it takes an illustrative or

descriptive approach.

The category of descriptive ethics is the easiest to understand - it involves describing how

people behave and what sorts of moral standards they claim to follow (Enderle & De George,

2014; Müller et al., 2014). Descriptive ethics incorporates research from the fields of

anthropology, psychology, sociology, and history as part of the process of understanding what

people do or have believed about moral norms (Alzola, 2015; Enderle, 2015; Müller et al., 2014).

The category of normative ethics involves creating or evaluating moral standards. Thus, it

is an attempt to figure out what people should do or whether their current moral behavior is

reasonable. Traditionally, most of the field of moral philosophy has involved normative ethics –

many philosophers endeavor to explain what in their considered opinion people should do and

why (Alzola, 2008). Any attempts to measure or quantify ethical standards are normative. Hence

the matrix in Figure 1 provides a tool for observers to explain their perception of laws, rules,

regulations, actions or entities.

In virtue ethical practice, there are six core values (Moylan & Walker, 2012). These core

values are Honesty, Integrity, Loyalty, Fairness, Responsibility, and Citizenship (Moylan &

Walker, 2012). In addition to these core ethical values or virtues, scholars have established six

fundamental moral principles. The first moral principle is the Golden Rule which states that do

unto others as you would like them to do unto you. The second ethical principle is the Immanuel

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Kant’s Categorical Imperative which posits that if an action is not right for everyone to take, it is

not reasonable for anyone. The third principle is Descartes’ Rule of Change which holds that if

an action cannot repeatedly be taken, it is not right to be taken at all. The fourth principle is the

Utilitarian Principle that says to take the action that achieves the highest or greater value

(Enderle & De George, 2014). The fifth key ethical principle is the Risk Aversion Principle that

states that ethical people should take the action that produces the least harm or the least potential

cost. The sixth and final principle is the principle of “no free lunch” rule that states that people

should assume that virtually all tangible and intangible objects are owned by someone else unless

there is an explicit declaration otherwise’ (Alzola, 2015; Enderle, 2015; Müller et al., 2014).

In the main, Business ethics holds that an action is permissible, required, or wrong if and

only if it is an action that a person of good character would (or would not) characteristically

perform under the circumstances (Alzola, 2015). Thus, what is right and what is wrong in virtue

ethics is defined by reference to people and their traits, which are their basic moral concepts

(Alzola, 2015). Leaders, Managers and all employees of businesses are expected to be virtuous

people. It is then expected of them to understand these principles and apply them first in setting

the missions and goals, then in their execution of the tasks (Alzola, 2015).

Influence of Ethics on Leaders and Followers

Müller et al. found that Ethical issues in organizations can be placed in seven categories.

These categories are transparency, optimization, relational, Power and political issues, Illegal

actions, Role conflicts, and Underperforming governance structure (Müller et al., 2014).

Transparency is needed to stimulate ethical awareness through information sharing, which

ultimately ensures accountability for the performance of individuals and their organizations

(Müller et al., 2014). Optimization issues are at the core of Kohlberg's traditional six-stage model

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of increasingly higher levels of moral sophistication; ethical optimization constitutes the lowest

level and justice, rights, and social responsibility the highest level (Müller et al., 2014).

Relationship issues arise from the dilemma of either sacrificing personal relationships for the

sake of the organization or vice versa (Müller et al., 2014). Power and politics issues emerge

from the use of power or politics to enforce decisions or changes in projects. Illegal actions

issues include fraud, corruption, corruption, blackmailing, and bribery. Role conflicts issues arise

from differences in cultural, religious, legal, or career values. Lastly, Underperforming

governance structure results from low or non-involvement of governance institutions when their

role is crucial for project progress (Müller et al., 2014).

Ethics scholars are critical of the claim that shareholder-owned corporations should

maximize shareholders’ wealth; in general, they call for businesses to aim at serving all their

stakeholders, or society as a whole (Moylan & Walker, 2012). The trust that builds between the

managers and the governance structure can influence the trust the managers and other

stakeholders have in Business and their employees. An organization's leadership structure should

emphasize a stakeholder orientation. The structure should trust managers to address ethical

issues appropriately to increase trust among and between the participants in the organization

(Müller et al., 2014). Leaders in organizations involved in the international operation must take

note of that fact that those in the driver’s seat who determine the rules of the game risk are

ignoring, disregarding, or taking for granted the power imbalances (Enderle, 2015). In the

meantime, those affected who could usually feel the impacts may have no say in changing them.

It is emphasized that in international operations, corporations should respect the human rights of

their stakeholders. Secondly, they should ensure their counterparties or vendors follow the same

practice, not too violet human rights. Finally, they should not do business in countries where

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human rights violation is the norm (Enderle, 2015). These actions will conform to the view that

business solves societal challenges to ensure the survival and development of humanity. It also

conforms to the view that economic profits are just a milestone and not an end in them.

Personal Experience
There are four ethical perspectives as reported by Enderle (2014) in dealing with

international clients on both a personal and country level (Enderle, 2015). A first view is a

foreign person or country; the foreigner has to adapt themselves to the host. The National borders

are relatively impermeable in both directions – this is, “the when you are in Rome do what the

Romans do” respectfully of course (Enderle, 2015; Enderle & De George, 2014). The second is

the empire type perspective where international relations are taken as a pure cross-national

expansion of dominant domestic relations without significant modification. This point of view is

the, “forgot your primitive sensitivities, I have come to civilize your approach.” From the host

perspective, the perceived asymmetric power relationship often involves misunderstanding,

exploitation, and repression (Enderle & De George, 2014). The third ethical view is the Business

Ethics interconnection type where each one keeps their values which are appropriated by both,

but both have common unifying perspectives. The last view is the global ethical perspective that

appreciates universally expected moral values that each one has to adhere. In working with

various clients at different times, I have had to make judgment calls on which perspective makes

sense, and each person has to go through that process in international business. Case in point, do

not unplug religious calls and do not insult a religion in foreign lands; morals and ethics are not

universal, or yours are not superior (Coe & Shani, 2015).

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Application
Fairness or justices may be distributive, procedural, and interactional. Customers,

employees and stakeholders perception and relationship to corporations depends on their

perception of fairness. Corporate leadership can apply the principles of ethics in business to

develop the firm’s relationship with all the stakeholders. In as much as we would like, to depend

on the goodness of people in corporate leadership, we must create duties that we expect of them.

We require that everyone be responsible for the outcomes of their actions. Determining intention

or motive is challenging, but previous actions or omission may guide in the subjective analysis of

intentions. In corporate leadership, the Duties Ethics and the Justices or Consequential theory

may lend themselves to measuring, while the virtues ethics and motives may be had to quantify

or measure.

Recommendations
Corporate leaders and aspiring leaders should strongly consider the understanding and

practice ethical principles in their day to day operations. People assign value, to generate value

the people must be taken into account. Sustainable value generation can only be achieved if the

stakeholders perceive that there is fairness in the distribution, process and interpersonal relations

in the firm. The Decision Ethics Matrix ® suggested in this article is useful in critically looking

at all actions of commission or omission, all rules and regulations, and all process and

procedures to ensure that they are ethical before implementation.

Conclusion
Unethical behavior should not be tolerated in any organization. Morals may be relative,

but ethics are well understood, some of which may be codified into procedures, taboos,

processes, rules, regulations, and laws. In change management, it’s imperative to understand why

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Business Ethics P a g e | 15

a procedure, process, rule, regulation or law was introduced before removing it; take into account

interconnectivity among stakeholders and outcomes. A classic example is when Christian

missionaries went into western Kenya. They found that it was taboo for expectant mothers

among the Luhya people to eat ripe bananas and eggs. They concluded that the taboo was a way

of greedy primitive men denying women the nutrients they needed. They told their converts to

ignore it. Childbirth deaths skyrocketed among the converts. The missionaries blamed it on

witchcraft from the primitive men. The two sides were both right, from their historical

perspectives. Each one did not learn from the other. There was no stakeholder inter-pollination.

The taboo was in place because the Luhya of old had observed that women have bigger babies

when they eat ripe banana and eggs, which had difficulties passing the birth canal. The solution

was to stave the babies slightly then feed both the mother and the baby after birth; it obviously

worked because there were people and babies in the region pre-Christianity. The missionaries, on

the other hand, thought that the mother and baby need to be fed and kept healthy, they forgot

about the small matter of lack of delivery facilities that could offer assistance in case of

difficulties at birth! Remember this story, every time you want to apply lessons learned in a

different setting, consider all the linkages and why your experience may not apply. The taboo

was ethical, the edict that removed it may have seemed fair and justice but it did not take into

account all the connectivities of both stakeholders and the environment.

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