ETHICS

and
BUSINESS
 “There are two educations.
One should teach us how to make a living
and the other how to live.”

-John T. Adams
 Objectives:
• Understand the nature of business from the moral
perspective
• Rationalize the importance of ethics in business
• Apply the dynamics of moral reasoning as a
framework for making ethical decisions in business
• Examine the morality of profit-motive in business
• Justify the need for ethical propriety in business and
the corporate world
Business is part of human society. And since it is part of the complex
web of interaction among institutions and people, its activities must
be viewed and examined from the perspective of morality.

Business without ethics threatens the survival of human society and

in some cases, destroys the fiduciary relationships of people. The
study of business ethics paves way for our common understanding
of the fundamental concepts of what is right and wrong in our
human conduct and its implications to business as an important
human activity.
 THE NATURE OF BUSINESS
 For as long as people have needs and wants, there will always be business. Those
who have capital will continue to produce and sell goods and services that will satisfy
the needs and wants of customers.
 Business is an activity that is part and parcel of human society. Society will not exist
without business. Since business is an integral part of the society, its activities must be
examined from the ethical perspective, in the same way that society examines politics,
economics, government, culture and religion from the moral point of view.
 The fundamental reason for examining the activities of business from the moral
perspective is for the promotion of the common good, protection of the individual’s
interests and the preservation of the human society in general.
 Without ethics, business will be a chaotic human activity because there will be no
common understanding and agreement about what is right and wrong human
conduct.
 THE NATURE OF BUSINESS

BUSINESS is also a complex enterprise that involves

major activities like purchasing, manufacturing,
marketing, advertising, selling and accounting.

BUSINESSMEN deal with suppliers, customers,

workers, employees and even competitors.
 THE NATURE OF BUSINESS
Ironically, it is within this structure of interaction of people that a lot of
questionable practices occur – misrepresentation, questionable pricing
policies, false advertising, misbranding, lying, adulteration, under
competition, and local price-cutting, among others.

The bottom line is, somewhere, somehow people’s rights are being
violated, their values disrespected and the interest of the common good
disregarded. Business is a good human activity. However, it is the selfish
motive and personal interest of unscrupulous businessmen that make
business and in some instances, unproductive.
 THE IMPORTANCE OF ETHICS IN BUSINESS
The study of Business Ethics paves the way for a common ground in our
understanding of the fundamental idea of what is good and what is bad in
our human conduct. Without ethics, people especially businessmen, will set
their own moral standards, moral rules and moral principles.

This would result into a kind of subjective morality, in which case, what is
good for one may be bad for another and vice versa. With this subjective
ethical paradigm, business people will consider some of their actions good
but unacceptable to others, e.g., cheating the customers to gain profit may
be acceptable to some businessmen but bad for others.
 THE IMPORTANCE OF ETHICS IN BUSINESS

Ethics as a science does not only evaluate the

MORALITY of our human conduct but also provides us
with a common understanding of the universal,
objective and irreversible MORAL PRINCIPLES that
should govern our human behaviour and guide our
MORAL DECISIONS.
 THE IMPORTANCE OF ETHICS IN BUSINESS

Another important aspect in business that needs

profound examination is the manner in which business
leaders and managers confront ethical issues and
problems affecting the flow and dynamism of business
activities.
 THE IMPORTANCE OF ETHICS IN BUSINESS

Business Ethics opens a novel way of resolving moral

problems and ethical dilemmas affecting business
transactions and the interactions of people in the
corporate world. The study of Business Ethics will also
enhance the human and interpersonal skills of managers so
they can be more effective in managing the human side of
the organization.
 THE BUSINESSMAN’S MYTH
ABOUT BUSINESS ETHICS

Businessmen are not immoral. And it would be disastrous

to judge and conclude that business people commit
unethical acts in doing business. Business, certainly is a
good and productive human activity. However, it is the
businessman’s wrong perception about the role that ethics
plays in the world of business that affects his moral
judgment and decision making.
 Myth 1: Ethics Is a Personal Affair
and Not a Public Debatable Matter
Some businessmen claim that ethics is a private issue and not a
public matter. In one sense, this is true because one’s concept
of morality is a result of the environmental factors like religion,
culture and family values that have had a great impact on the
development of the ethical person. On the other hand, man is
also a social being, which means he is always a being in relation
with other men. To say, therefore, that ethics is a very
subjective matter is a myopic view of our human nature.
 Myth 1: Ethics Is a Personal Affair
and Not a Public Debatable Matter
If ethics is a subjective thing, then it will make morality very
personal and relative, therefore, what i good for one person
may be bad for another. And what is bad for one person may
be good for another person. If one believes that lying is good, it
does not necessarily mean that it is also good for other. If
morality is subjective, people will make their own moral laws
and principles and could be worse if they begin to impose
these personal norms on others.
 Myth 1: Ethics Is a Personal Affair
and Not a Public Debatable Matter
People are entitled to their own values and religious beliefs but
in the exercise of these value systems, they must also consider
the values and religious orientations of others. Certainly, our
personal rights are always limited by the rights of others. The
individual’s moral values may be very subjective but in the
exercise of this value system, he must also consider the impact
and gravity of his actions on others. Thus, ethics is not a
personal affair but a public debatable matter.
 Myth 2: Ethics and Business Do Not Mix
Some businessmen claim that Ethics has no place at all in
business. This view is most likely grounded on the assumption
that business is an autonomous human activity where ethical
standards do not exist and that businessmen are free to do
what they want. To claim that business is an activity which is
independent of morality is again a short-sighted view of the
relationship between ethics and business.
 Myth 2: Ethics and Business Do Not Mix
Since business is part of human society and its activities operate
within the structure of beliefs and value systems of people, it
must also be viewed and examined from the perspective of
ethics. Any business activity that is devoid of morality will bring
more harm than good to people in particular, and the society in
general. Furthermore, the belief that ethics does not mix with
business will only justify illegal activities and will most likely
promote questionable practices in business activity. Certainly,
Ethics has an important place in business.
 Myth 3: Ethics in Business Is Relative
Akin to the view that ethics is a private and subjective matter
is the claim that morality depends on the person himself and
his environment. This is another wrong perception on the role
that ethics plays in the world of business. Some businessmen
claim that morality is relative, which means, the fundamental
concepts of right and wrong depend on cultural and religious
values of people. This implies further that what may be
considered a right action in one country may be unacceptable
in another country.
 Myth 3: Ethics in Business Is Relative
Abortion may be legal in Japan but certainly not in the
Philippines. If morality is relative then what is good in one
place may be evil on the other places, and vice versa. And if
morality is viewed this way, then who’s going to tell us which
actions are good and which actions are bad objectively? The
truth of the matter is, there are universal moral principles that
people share and agree upon regardless of religious
orientations, cultural expressions and value systems.
 Myth 3: Ethics in Business Is Relative
And so, all peoples around the world believe that murder is
always wrong, that stealing is always a bad action and bribery
is always unacceptable. The study of Ethics paves way for our
common understanding of the fundamental principles of right
and wrong as reflected in our nature and conduct as human
beings.
 Myth 4: Good Business Means Good Ethics
Some businessmen claim that good business means god ethics.
This certainly is a myth. A business may be profitable but the
means of acquiring profits may be questionable. Drug-
trafficking is a profitable business and so is human smuggling
and the like, but they certainly violate some rules and values of
people. The study of Ethics in business encourage businessmen
and managers to look closely into the end and the means of
doing business. Profit maximization is good end in business but
the means of getting those profits must also be examined. The
end does not justify the means.
 Myth 5: Business Is a War
Some business leaders and businessmen believe that business is
a war. For them, the market is an arena of gladiators trying to
fight for survival and vying for the number one position.
Because of this belief, businessmen often resort to using
predatory tactics to destroy the competitors in order to emerge
as the market leader. Business is a good human activity. And as
an integral part of the society, it must promote healthy
competition and not destroy the competitors.
 THE RELATIONSHIP BETWEEN
ETHICS AND BUSINESS
Ethics plays an important role in business. Without morality,
business will be a chaotic human 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.
 Significant Role that Ethics Plays
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 rules and moral evaluation.
2. In business, as 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.
Example: capital punishment (death by lethal injection)
 Significant Role that Ethics Plays
in the World of Business
3. Laws are insufficient. They cannot cover all aspects of our
human behaviour. Laws are sometimes absent or unclear in
some areas of our human conduct. Ethics is the unwritten
law, written in the hearts of men. In the absence of the law,
Ethics will help us discern the correct conduct to follow
based on the dictates of conscience and reason.
 Significant Role that Ethics Plays
in the World of Business
4. In today’s technocrat-oriented business education, the trend
is to train managers to maximize profits by quantifying the
operations of business. Certainly, the operations of business
must be aided by quantitative instruments to measure and
predict expected outcome. However, this is only one side of
managing the enterprise. Managers and business leaders
must also be prepared to respond to complex situations
bearing ethical consequences.
 Significant Role that Ethics Plays
in the World of Business
5. Peter Drucker argues that “the business enterprise is an
organ of society and its actions have a decisive impact on
the social scene.” Drucker simply reminds us that a business
corporation is not just created to make profits but also to
consider its moral and social obligations to its stakeholders.
Business organizations should not just look after their own
interests but also the interest of the common good.
 MORAL REASONING IN BUSINESS
The essence of studying Business Ethics is to provide the manager as
a decision maker with a framework for the resolution of moral
issues and problems affecting business activities and the
organization itself. Moral reasoning is a process in which ethical
issues and problems are benchmarked against a moral standard
so that a moral judgment is make possible. Since managers are
tasked to solve problems of the organization and its related
activities, it is also the responsibility of managers to help in the
resolution, if not the prevention of moral issues that may have
adverse effect to the operations of the business.
 Framework of Moral Reasoning
Ethical Moral Norm
REALITY Moral Standard Moral
Issues /
CHECK Company Policy Judgment
Problems
Ethical Principle

SITUATION PROBLEM DECISION

RESOLUTION
ANALYSIS ANALYSIS ANALYSIS

Examples: -gravity of offense -company rules /

Graft -frequency of offense policies
-harm done -Moral or Immoral
Sexual Harassment -number of people
-ethical principles
Theft -codes of conduct -Legal or Illegal
affected
Bribery -cost -moral norms
 Characteristics of a Good Moral Standard
1. A good moral standard is one that looks at the issue as something
that is very serious, e.g., murder, graft and corruption, stealing.
2. A good standard must be grounded on good moral argument. A
good argument is an argument that always tells the truth. A solid
moral argument leaves no room for loopholes and counter
arguments.
3. A good standard should be objective and not subjective. It should
be universally accepted and should apply to all. What is good for
one people should be at the same time good for everybody.
4. A good standard, when violated, brings about feelings of guilt,
shame and remorse of conscience.
 Requirements for a Good Moral Judgment
1. A good moral judgment must be logical. This means that the
decision maker must arrive at an informed resolution of the issue
based on logical reasoning.
2. A good moral judgment must be based on facts and solid
evidence. The information used in the process of moral
reasoning must not come form weak sources like hearsay,
rumours and grapevine.
3. A good moral judgment must be based on sound and defensible
moral principles. A weak ethical principle is open to a lot
criticisms.
 THE MORALITY OF PROFIT-MOTIVE
People go into business for a number of reasons. Some go
into business for personal satisfaction. Other are in
business to earn a livelihood. Still others are in business
because they want to serve the society through goods
and services they offer to the customers. But the most
common, if not the most dominant reason why people
go into business, is to make a PROFIT. Business activity
is unthinkable without profit as motive.
 THE MORALITY OF PROFIT-MOTIVE
Businessmen consider profit as a form of anticipated reward or a
compensation for the efforts they spend, skills they apply and
returns for the capital they invested in putting up and organizing
the business.
Traditionally, business people have looked at the profit motive as the
most important aspect of business. The view of Milton Friedman,
a noted economist, reflects this sentiments. He says that the
“only responsibility of business is to make profit so long as one
stays within the rules of the game and engages in open and free
competition without deception or fraud.”
 THE MORALITY OF PROFIT-MOTIVE
Peter Drucker, an equally famous management guru on the other
hand, disagrees with this view and says, “the primary
responsibility of business is to look for customers and satisfy
their needs and wants. Following this line of thinking, Drucker is
simply hinting that, albeit, profit is an important aspect of
business, there are other factors that the businessman must also
consider in doing business such as: CUSTOMER SATISFACTION,
QUALITY PRODUCTS, AFTER SALES POLICIES, FAIR AND
REASONABLE PRICING.
 The Assumptions of Profit-Motive
Understanding the nature and morality of profit-motive starts
with examination of some given factors and assumptions in
which the idea of profit-motive operates. These factors are
the following:
1. Profit-motive in business is an ethical issue. Since business is
an integral part of society, its activities, including profit-
making, must be examined from the perspective of morality.
However, in business, the concept of what is reasonable
profit is still a subject of endless debates.
 The Assumptions of Profit-Motive
2. Profit-motive as an ethical issue operates within the two important
aspects of our human conduct – freedom and the structure of
business. The element of freedom implies that businessmen have
the right to decide on the amount of profit they want to earn in the
process of selling goods and services to customers. The structure of
business, on the other hand, is a tacit guideline that governs
business activities including profit-making. Thus, any business
activity is aimed at a monetary gain because that is part of the
structure of business. The ultimate criterion therefore of gauging
the success or failure of business is its ability to generate profits.
 The Good and the Bad Sides
of Profit-Motive
Just like any other ethical issue, profit-motive has two sides – the
good and the bad.
A. The Good Side of Profit-Motive:
1. Profit-motive motivates people to do something meaningful,
e.g., it gives human life a goal of pursue and something to live
for.
2. Profit-motive promotes ingenuity and cleverness in running a
business, e.g., business leaders and entrepreneurs have to
struggle hard to overcome obstacles in order to achieve success.
 The Good and the Bad Sides
of Profit-Motive
3. Profit-motive makes people productive. Because of their desire for
money, businessmen have become productive and some of their
products have been useful and have enhanced the quality of human
life.
4. Profit-motive generates potential capital for the business. Profit is
potential capital, something that can be invested to establish new
businesses. In this way, profit also results in more jobs and more
goods and services for the public. The society as a whole thus
benefits from the profit gained by a profit-oriented capitalist.
 The Good and the Bad Sides
of Profit-Motive
B. The Good Side of Profit-Motive:
1. Profit-motive promotes rivalry among competitors. Sometimes the
competition becomes so stiff that it results into a “dog-eat-dog”
world of business where success is achieved by competing with
others and pushing them down in order that one’s own business
might succeed. This certainly dehumanizes business as an
important human activity.
2. Profit-motive makes people focus only on making money, that is, to
sell as many goods as possible without considering whether or not
these products satisfy the needs and wants of consumers and end
users.
 The Good and the Bad Sides
of Profit-Motive
3. Profit-motive turns businessman from being a reflective and a
questioning person because he focuses his attention only on a practical
activity of making money. Thus, a life centered on profit only results
into a narrow view of existence, deficient in many important
dimensions of human life.
4. Profit-motive promotes self-interest rather than the common good. It
has, to some extent, benefited some businessmen but it has also
created some social costs that many people, if not the majority, have to
bear, e.g., depletion of the natural resources, toxic wastes being
thrown into the rivers, pollution of the environment and disregard for
the next generations to come.
 Ethical Considerations of
Profit-Motive in Business
1. Earning profit is a good and valid activity in business. Commercial
activities will be absurd without the profit-motive. However, in
the process of generating profit, an ethical discernment is
required for the businessman: Is my profit fair enough for me
and my customer? Did I consider important factors and
parameters in making profit such as the costs of goods sold,
overhead, mark-ups, profit margins and the like?

2. Making excessive profits is totally wrong. It leads to greed,

avarice and manipulation of the customers.
 Ethical Considerations of
Profit-Motive in Business
3. Profit is not the “be-all and the end-all” of doing business.
Certainly, there are other factors to be considered in business
such as, customers’ satisfaction, respect for the environment,
enhancement of the quality of life and preservation of the
society.
4. The teachings of the Catholic Church do not totally condemn profit
as part of business activity. Pope Pius XII, in Quadragesimo Anno
(1931), does not prohibit the producer from enriching himself
provided “one respects the laws of God, does not prejudice the
rights of others, and works according to faith and right reason.”
 THE CONCEPT OF
MORAL RESPONSIBILITY
In the story of creation, recounted in the third chapter of the book of
Genesis (Gen. 3:1-13), the first man and woman committed an
infraction against God’s commandments. As told in this particular
story, Adam and Eve violated God’s commandment by eating the
fruit of the Three of Knowledge. As a result of this infraction,
both Adam and Eve tried to run away and hide themselves from
God. When confronted about their disobedience, they tried to
blame one another and eventually, also blamed the serpent. This
short metaphorical story reflects man’s propensity to avoid
accountability and responsibility for his bad or evil actions.
 THE CONCEPT OF
MORAL RESPONSIBILITY
However, man is by nature a being and a creature who is supposed to
be responsible and accountable for his actions. The reasons for
this is twofold: 1) Man is rational being. This means he is cable of
moral judgment. Further, this also means that man is thinking
being, thus, he is aware of his intentions as well as the
consequences of his actions. Man therefore, knows what he is
doing because he is rational and a thinking creature. 2) Man is a
free being. This means that he has the capacity to exercise his
choices. This assumes that man is capable of choosing what is a
good and a bad action for him.
 THE CONCEPT OF
MORAL RESPONSIBILITY
These two assumptions provide the bases for giving praise,
blame, reward and punishment for his actions. These
assumptions likewise provide the reasons why we are
held responsible for our actions. These assumptions,
e.g., that we are thinking and a free being imply that we
are capable of assuming responsibly for our actions.
 Author: William H. Shaw
Meanings of Moral Responsibility:

1. Moral Responsibility refers to holding to

people morally accountable for some past
action or actions. This simply means assigning
to people blame or praise for particular
actions that they have performed.
 Author: William H. Shaw
Meanings of Moral Responsibility:
2. Moral Responsibility also means care, welfare or treatment
of others as derived from the specific social role that one
plays in the society. Thus, parents are responsible for taking
care of their children in the family, teachers are responsible
for what occurs in their classrooms and doctors are
responsible for the treatments of their hospital patients. In
this second sense, moral responsibility implies a duty to be
performed by a person depending on his role in the society.
 Author: William H. Shaw
Meanings of Moral Responsibility:

3. Moral Responsibility likewise to one’s capacity

for making moral or rational decisions on his
own. According to Shaw, if a person is not
morally responsible in this third sense, he or
she cannot be considered morally responsible
in either of the other senses.
 BUSINESS ETHICS DEFINED
1. Business Ethics is the study of what is the right and wrong
human behaviour and conduct in business.
2. Business Ethics is a study of perceptions of people about
morality, moral norms, moral rules and ethical principles as
they apply to people and institutions in business.
3. Business Ethics is the study, evaluation, analysis and
questioning of ethical standards, policies, moral norms, and
ethical theories that managers and decision makers use in
resolving moral issues and ethical dilemmas affecting business.
Thank you!
