CHAPTER 2

ETHICAL THOUGHT AND

MORAL REASONING IN
BUSINESS: BASIS FOR
ETHICAL BEHAVIOUR
 LEARNING OUTCOMES:

2. ETHICAL CONCEPTS,
THEORIES AND
PHILOSOPHICAL
APPROACHES AND ITS
APPLICATION TO BUSINESS
(CONVENTIONAL ETHICS)

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 (a.) Differentiate between moral and legal standards

(b) Explain and apply the following ethical

philosophies/theories: 
- Ethical relativism
- Egoism
- Altruism
- Consequentialism
- Deontology (universalizability, respect for rational
being, autonomy)
- Types of justice (distributive, compensatory &
retributive) 
- Theories of justice (Egalitarian and Libertarian)
- Virtue Ethics
- Golden Rule
Topic Outcome - Enlightened Self-Interest
- John Rawl’s Veil of Ignorance 
- Vices and Virtues
Ethical Philosophies and Concepts and Its - Lawrence Kohlberg’s Cognitive Moral Development 
Application to Business
( c) Distinguish between ethical and unethical actions
based on ethical reasoning
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 ETHICS
Ethics is a set of rules of conduct or "moral code".

Four CHARACTERISTICS of morality and moral codes:

1. Beliefs about the nature of man.
2. Beliefs about ideals, about what is good or desirable or worthy of pursuit for its
own sake.
3. Rules laying down what ought to be done and what ought not to be done.
4. Motives that incline us to choose the right or the wrong course.

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 Differentiate between Moral & Legal Standards
»Moral Standards
● Morals are concerned with the principles of right
and wrong behavior and the goodness or badness
of human character.
● Morality governs private, personal interactions.
● Morality demands that men should act from a
sense of ethical duty. Morality has no such
enforcing authority from the state. It is
autonomous
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»Legal Standards
● Law is the system of rules that a particular country
or community recognizes as regulating the
actions of its members and may enforce by the
imposition of penalties.
● Law governs society as a whole, often dealing
with interactions between total strangers.
● the law demands an absolute subjection to its
rules and commands. Law has enforcing authority
derived from the state. It is heteronymous
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 Ethical relativism
Ethical relativism is the theory that holds that morality is relative to the norms of one's culture. That is, whether an
action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be
morally right in one society but be morally wrong in another.

Advantages of ethical relativism is that Disadvantages of ethical

it allows for a wide variety of cultures relativism is that truth, right
and practices. It also allows and wrong, and justice are all
people to adapt ethically as the relative. Just because a group
culture, knowledge, and technology of people think that something
change in society. This is a good and
valid form
is right does not make it so.
of relativism

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 Egoism
Egoism is a theory, in ethics, that human beings act or should act in their own
interests and desires. Egoism is opposed to altruism, which asserts that human
beings should act in ways that help others.

DEC
Egoism is a philosophical theory in ethics, which has at least three subtypes,
2019 descriptive egoism, normative egoism and conditional egoism.
PART
B Q1
(c) Descriptive egoism, also Normative egoism, Conditional egoism, which
known as psychological also termed ethical asserts that egoism is morally right
egoism, contends that and acceptable if it leads to
egoism, claims people morally acceptable ends; self-
people always act in self- should act in self- motivated actions can be
serving ways, though
serving ways because considered morally acceptable, if
they may try to disguise they lead to the betterment of
their selfish motives.
it is morally right.
society and the public as a whole

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 Altruism
Altruism is the unselfish concern for other people—doing things simply out of a
desire to help, not because you feel obligated to out of duty, loyalty, or religious
reasons. It involves acting out of concern for the well-being of other people.
Contrasted with egoism, (which claims individuals are morally obligated to serve
themselves first)

Some examples of altruism include:

JUL
2020 ● Doing something to help another person with no expectation of reward
PART
A Q6
● Forgoing things that may bring personal benefits if they create costs for
others
● Helping someone despite personal costs or risks

Altruism also builds social connections. For example, studies show that
people who are altruistic tend to be happier, to be healthier, and to live
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 Consequentialism
Consequentialism is a theory that suggests an action is good or bad
depending on its outcome. An action that brings about more benefit than
harm is good, while an action that causes more harm than benefit is not.
The most famous version of this theory is Utilitarianism.

For example: The investor judgement based on its expected return

Actual return < Actual return > investor's
investor's expectation, expectation, then it is
then it is deemed to be considered a Good Investment
Bad Investment Decision Decision

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DEC 2018 PART B Q1 (c), JUN 2019 PART B Q1 (c)
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 DEONTOLOGY
(Universalizability, Respect for Rational Being, Autonomy)
● Deontology is a theory that suggests actions are good or bad according to a clear set of rules. Its
name comes from the Greek word deon, meaning duty. Actions that obey these rules are ethical,
while actions that do not, are not. This ethical theory is most closely associated with German
philosopher, Immanuel Kant.
● Kant believed that ethical actions follow universal moral laws, such as “Don’t lie. Don’t steal. Don’t
cheat.”
● Deontology is simple to apply. It just requires that people follow the rules and do their duty. This
approach tends to fit well with our natural intuition about what is or isn’t ethical
● Deontology is a philosophical approach that requires an ethical decision depends upon the
duty,obligations, rights and justice.

PYQ: DEC 2016 PART B Q1 (c), JUL 2017 PART A Q1 (c), JAN 2018 PART A Q1 (c),
JUN 2018 PART B Q1 (c), JUN 2019 PART A Q1 (c), DEC 2019 PART A Q1 (c),
FEB 2020 PART A Q4, JUL 2020 PART B Q1 (b)
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 Universalizability

● Universalizability is not a substantive moral principle but a logical feature of the

moral terms: anyone who uses such terms as “right” and “ought” is logically
committed to universalizability.

● Universal judgments are also impartial. They are impartial because the person
who makes them will be required to judge him or herself according to the same
standard by which he or she judges others

● If an action is moral for one person, it must be accepted as moral for everyone.

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 Respect for Rational Being

● The person performing the action should not see others as a

means to further his own interests, but instead respects them
as individuals.

● Kant claims that human beings, they are to be treated as

persons.

● This can be understood as not treating people as mere

resources, respecting their autonomy, rights, even choices.
People should be treated with respect and have rights that
should not be violated upon in the face of oppression.
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 Autonomy
● Autonomy is the moral right one possesses, or the capacity
we have in order to think and make decisions for oneself
providing some degree of control or power over the events
that unfold within one's everyday life.

● Autonomy aims to protect human choice, rights, and

freedoms from the influence of corporations, the state, or
other individuals from an ethical perspective. It essentially
allows us to be our own ruler.

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 ACCORDING TO IMMANUEL KANT
» Immanuel Kant viewed that ethical actions follow universal moral laws such as “no lying”, “no cheating”, “no stealing”.
» Acting correctly when you follow your ethical duties and obligations, not because they might lead to good consequences and they
might increase your happiness or pleasure; rather, you do them for duty’s sake.
» Developed two laws for assessing ethically : 
1. Supreme principle of morality.
2. Demand should act only in such manner
Categorical imperative 
that you would prefer to have anyone else
(Must be obeyed unconditionally and absolute)
who is in a similar situation act in a similar
way.

Practical imperative (dealing 1. Everyone must be treated under the

with people) moral law.
2. Treating others as ends requires that
we acknowledge that we are all part of
society, part of moral community.

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 WEAKNESS OF DEONTOLOGY

» Categorical imperative does not provide clear guidelines for deciding which
principle to follow when two or moral laws conflict and only one can be chosen. 

» This is because categorical imperative sets high standard which hard ethic to
follow.

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 TYPES OF JUSTICE

DISTRIBUTIVE
COMPENSATORY 
RETRIBUTIVE

JAN18 PART B Q1(c)

DEC18 PART B Q2(b)
JUNE19 PART A Q2(d)
DEC19 PART B Q2(b)
16
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 TYPES OF JUSTICE
Distributive Justice
● Also referred as Social Justice. ● Examples of ‘burdens’ are burdens and duties
● Primarily on principles designed to cover the such as taxes and to be subjected to restrictions
fair distribution of benefits and burdens of over one’s property.
economic activity among individuals in a ● Distribute Justice recognizes that all members
society. of a social society do not have the same
● Its roots are in social order and it is at the roots advantages mentally, physically and socially.
of socialism, where equality is a fundamental ● Therefore, there has to be redistribution of
principle. Which also means that everyone is resources to achieve fair shares among
equal. all members of a society.
● Examples of ‘benefits’ are wealth, power and
freedom. BEST FOR You
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 Compensatory Justice

● Compensatory justice refers to the ● For example some argue that mine
extent to which people are fairly owners should compensate the
compensated for their injuries by workers (coal mine workers) whose
those who have injured them. health has been ruined.
● Another example, compensation
to workers who involved in
accident.
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 Retributive Justice
● Also known as corrective justice.
● Refers to the extent to which
punishments are fair and just.
● Those who commit certain kinds of
wrongful acts, paradigmatically
serious crimes, morally deserve to
suffer a proportionate punishment
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● So that justice is served and the
wrongdoer behavior is changed or
he or she is removed from society
● For example, Roger Ng Chong Hwa
carries a punishment of up to 10
years' imprisonment and a fine of at
least RM1 million upon conviction
for money laundering.
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 Theory of Justice
Egalitarian
Consider three claims about equality:
● All persons have equal moral and legal standing.
● In some contexts, it is unjust for people to be treated unequally on the
basis of irrelevant traits.
● When persons’ opportunities or life outcomes are unequal in some
important respect, we have a reason to lessen that inequality. (This
reason is not necessarily decisive.)

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 Egalitarian

Equality of what?
● Everyone should be treated the same
● All human beings are equals in some fundamental respects
● Each person has an equal claim to society’s goods and services
● Equality proportion regardless of individual differences

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 Jan 2018 Part B Q2B

Libertarian
● libertarian is committed to the principle that liberty is the most important political
value.
● People do not deserve equal economic returns since they did not make the same
contribution.
● Reward is compensated with effort.
● Liberty means being free to make your own choices about your own life, that what
you do with your body and your property ought to be up to you.
● People must not forcibly interfere with your liberty, and you must not forcibly
interfere with theirs.
● People are free to choose the kind of contribution they want to make.

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 VIRTUE ETHICS, GOLDEN RULE,
SELF-INTEREST, ENLIGHTENMENT

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Virtue Ethics
● It may, initially, be identified as the one that emphasizes the virtues, or moral character.
● In contrast to the approach that emphasizes duties or rules (deontology) or that
emphasizes the consequences of actions (consequentialism).
● Someone in need should be helped because helping the person would be charitable or
benevolent.
● The concept of a virtue is the concept of something that makes its possessor good.
● A virtuous person is a morally good, excellent or admirable person who acts and feels
as she should.

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Golden Rule
● The Golden Rule is the principle of treating others as one wants to be treated. It is a
maxim that is found in most religions and cultures.
● The most familiar version of the Golden Rule says, “Do unto others as you would have
them do unto you.”

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Self -Interest
● Self-interest generally refers to a focus on the needs or desires (interests) of one's self.
● Most times, actions that display self-interest are often performed without conscious
knowing.

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Enlightenment
● It is an European intellectual movement of the 17th and 18th centuries in which ideas
concerning God, reason, nature, and humanity were synthesized into a worldview that
gained wide assent in the West and that instigated revolutionary developments in art,
philosophy, and politics.
● Central to Enlightenment thought were the use and celebration of reason, the power by
which humans understand the universe and improve their own condition.
● The goals of rational humanity were considered to be knowledge, freedom, and
happiness.

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 John Rawl’s Veil Of Ignorance

● Rawl’s recognizes that persons act on self-interest.

● Veil of Ignorance: A person does not know who they are in the real world.
● A society where the members do not know anything about each other’s social position
and backgrounds is formed.
● Veil of ignorance helps to prevent people from promoting biased principles of justice
towards their own combination of talents and characteristics.
● Rules that are unfair and with bias will not get acknowledgement from the people.

Jan 2018, June 2018 &

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 Vices & Virtues

Vices
❏ Opposite of virtue
❏ Evildoing or immoral behaviour of
a person
❏ Will gives negative effects to
oneself and others
❏ The lives of citizens will be uneasy
and unhappy when majority of
people in a community are
immoral and evil.
❏ Example: Greedy, malice, drinking
alcohol & taking drugs, cruelty
Virtues
❏ Behaviour that shows high moral
standard, good deeds and thoughts
❏ Virtues will bring happiness and
goodness to the heart of a person and
it is the most useful and attractive
qualities in a person.
❏ Good conduct arises from habits that
in turn can only be acquired by
repeated actions and corrections.
❏ Example: Kindness, love, honesty,
courage, integrity, fairness

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Lawrence Kohlberg’s Cognitive Moral
Development 

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Cognitive Moral Development by Lawrence Kohlberg

● Kohlberg's theory proposed that there are three levels of moral

development with each level splits into two stages.
● Kohlberg suggested that people move through these stages in a
fixed order, and that moral understanding is linked to cognitive
development.
● The three levels of moral reasoning include preconventional,
conventional and postconventional.

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 Cognitive Moral Development by Lawrence Kohlberg

Stage 1
Level 1
Obedience & Punishment orientation
Preconventional Morality
● Focuses on the individual’s desire to obey
(Obedience & Egoism)
● It is shaped by the rules and avoid being punished.

standard of adults and ● E.g. an action is perceived as morally wrong

the consequences of because the perpetrator is punished; the

following or breaking a worst the punishment for the act is, the
rule. more “bad” the act is perceived to be.
● Concern with self with ● The individual will obey in order to avoid
egocentric manner. punishment.
● Common among children. BEST FOR You
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 Cognitive Moral Development by Lawrence Kohlberg

Stage 2 E.g. a child is asked by her

Instrumental Relativist Orientation parents to do a chore. Then
● The right behaviour is determined by
the child ask “what’s in it
for me?” and the parents
whatever the individual believes to be in
offer the child incentive by
their best interest. (“what’s in it for me”)
Dec 2018 -
giving her an allowance.
Q2(c)
● Shows a very limited interest in the needs of
others, only to the point where it might
further the individual’s own interest.
● As a result, concern for others is not based
on loyalty or intrinsic.
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 Cognitive Moral Development by Lawrence Kohlberg
Level 2
Conventional Morality
● An individual sense of
morality is tied to personal
and societal relationship.
● Still continue to accept the
rules of authority figures, but
this is now due to their belief
that is necessary to ensure
positive relationship and
societal order.
Stage 3
Good Boy, Nice Girl Orientation
● Behaviour is determined by social
approval.
● The individuals want the approval of
others and act in a ways to avoid
disapproval.
● Emphasis is placed on good behaviour
and people being “nice” to others.
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 Cognitive Moral Development by Lawrence Kohlberg

Stage 4
Law-and-Order Orientation
● The individual blindly accepts the rules and convention because their
importance in maintaining a functioning society.
● Rules are seen as being the same for everyone, and obeying rules by
doing what one is “supposed” to do is seen as valuable and important.
● If one violates a law, there is an obligations and duty to uphold laws and
rules.
● E.g. “I’m personally against the war, but would never publicly protest it on
campus without the administration’s permission”
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 Cognitive Moral Development by Lawrence Kohlberg

Level 3
Postconventional Morality
● Individual live by their own
ethical principles (basic
human rights/liberty/justice).
● They view rules as useful but
changeable mechanism,
rather than absolute dictates
that must be obeyed.
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Stage 5
Social-Contract Orientation
● Individuals have different view, rights and
values.
● Laws are regarded as social contracts
rather than rigid edicts.
● Individuals become aware that while laws
might exist for the good of the greatest
number, there are times when they will
work against the interest of particular
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 Cognitive Moral Development by Lawrence Kohlberg

Stage 6
Universal-Ethical-Principle Orientation
● Moral reasoning is based on abstract reasoning using universal ethical
principles.
● Universal principles of justice: equality of human rights and respect for
the person as an individual.
● People at this stage have developed their own set of moral guidelines
which may or may not fit the law. The principles apply to everyone.
● In this way, the individual act because it is morally right to do so, if they
violate those principles, they feel
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You
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ETHICAL REASONING
PROCESS

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 Ethical Reasoning Process
Ethical Reasoning: Pertains to the rights and wrongs of human conduct. Each
person has standards that are defined by their personal values which come into
play when faces certain dilemmas or decisions.

Practical Ethical Decision Making

Practical
Philosophical theories, constraints,
Personal
Utilitarianism,
Ethical Characteristics,
Consequentialism,
Organizational Behaviour
Deontology, Justice & Dilemma Features,
Fairness, Virtue Ethics Environmental
Forces

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Distinguish between Ethical and Unethical Behaviour Based on Ethical
Reasoning

Ethical Behaviour Unethical Behaviour

● An individual who ● A person who does not
follows the rules and obey the rules and has
abides the ethics will an unethical manners
get considered as a will get viewed as a
person with good person with bad and
and healthy habits. unhealthy habits.
● Respectful ● Disrespectful
● Being kind ● Bad and mean
● Fair ● Unfair
● Responsible ● Irresponsible
● Honesty ● Dishonest

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 Quantitative Reasoning Approach

Definition
Application of basic mathematics skills such as algebra, to
the analysis and interpretation of real world quantitative
information in context of a discipline or interdisciplinary
problem to draw conclusion that are relevant to students in
● QR can be found in areas such as health, economics, politics and science.

their daily life.

● QR and mathematics are inextricably linked but while mathematics is primarily discipline, QR is
primarily a skill.
● Ability to understand and use quantitative information and come to a solid conclusion. It involves
critical thinking skills to draw justified conclusions from facts and evidence available at hand

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 Importance of Quantitative Reasoning

As a component of a
complete education because To solve quantitative
it is one of four state- reasoning problems and to
mandate students learning make well-reasoned
outcomes judgements derive from
quantitative information in a
variety of context

Enable people to think

critically about mathematical
and numerical information
that surrounds them

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 Logical Reasoning Approach

Definition Types
The process of using a ● Deductive reasoning
rational, systematics series ● Inductive reasoning
of steps based on sound ● Abductive reasoning
mathematical procedures
and given statements to
arrive at a conclusion.

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 Logical Reasoning Approach

Deductive Reasoning
● Deductive reasoning means using a given set of facts or data to deduce
other facts by reasoning logically.
● It starts with the assertion of a general rule and proceeds from there to
guarantee specific conclusion.
● Deductive reasoning moves from the general rule to specific application.
● In deductive reasoning, if the original assertions are true, then the
conclusion must be also true.
● E.g. if x = 4 and y = 1, then 2x + y = 9

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 Logical Reasoning Approach

Inductive Reasoning
● Generalize an information based on the pattern and trend.
● Inductive reasoning moves from specific to the general.
● Conclusions reached by the inductive method are not logical necessities;
no amount of inductive evidence guarantees the conclusion.
● Because inductive conclusions are not logical necessities, inductive
arguments are not simply true.
● E.g. last semester TAX lecturer is awesome

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 Logical Reasoning Approach

Abductive Reasoning
● Introduced by the term “Guessing” since conclusions drawn here are
based on probabilities.
● Typically begins with an incomplete set of observations and proceeds to
likelist possible explanation for the set.
● Abductive reasoning yields the kind of daily decision-making that does
its best with the information at hand, which often is incomplete.
● E.g. the bus is late

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 Moral Reasoning Approach

Definition
Thinking process with the objective of determining whether an idea is right or
wrong

● In order to know whether something is right or wrong one must first

know what that something is intended to accomplish.
● Moral reasoning is also called as moral developing
● The approach is important as people consistently faced with moral
dilemmas and conflicts.

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 Components of Moral Reasoning Approach

Moral Sensitivity
Ability to see an ethical dilemma including how our actions will effect the others

Moral Judgement
The ability to reason correctly about what ought to be done in a specific situation

Moral Motivation
A personal commitment to moral action, accepting responsibility for the outcome

Moral Character
Courageous persistence in spite of fatigue or temptations to take the easy way out

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