11/03/2022
By: Ms O.N Kangandjo
CHAPTER
1
ETHICS AND
BUSINESS
1
Learning outcomes
• Define “business ethics”
• Apply the six basic stages of moral
development to concrete situations
• Advise whether should moral
standards be applied to business
• Determine when a person is morally
responsible for doing wrong
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WHAT IS BUSINESS ETHICS?
What is ethics?
• According to the dictionary, the term
ethics has a variety of different
meanings.
• The principles of conduct governing an
individual or a group
• Ethics is “the study of morality”
• A set of moral principles.
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• 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.
• Morality: The standards that an individual or
a group has about what is right and wrong or
good or evil
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• Although ethics deals with morality, it is not
quite the same as morality.
• Ethics is a kind of investigation and includes
both the activity of investigating as well as
the results of the investigation whereas
morality is the subject matter that ethics
investigates.
• The ultimate aim of ethics is to develop a
body of moral standards that we feel are
reasonable to hold i.e standards that we have
thought about carefully and have decided are
justified standards for us to accept and apply
to the choices than we make in our lives.
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Sources of Ethical Norms
Fellow Workers
Fellow Workers
Family
Regions of
Country
Profession
The Individual
Conscience
Friends
The Law
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Employer
Religious
Beliefs
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Society at Large
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Moral and Non moral Standards
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.
• Moral norms can usually be expressed as general
rules or statements, such as “Always tell the truth,”
“It is wrong to kill innocent people.”
Non moral standards
• The standards by which we judge what is good or
bad or right or wrong in a non moral way.
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• Examples of nonmoral standards
include the standards of etiquette by
which we judge manners as good or
bad, the standards we call the law by
which we judge legal right and wrong,
the standards of language by which we
judge what is grammatically right and
wrong, the standards of aesthetics by
which we judge good and bad art, and
the athletic standards by which we
judge how well a game of football or
basketball is being played
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What are the characteristics that distinguish moral
standards from standards that are not moral?
• Moral standards deal with matters that we think can
seriously injure or seriously benefit human being. For
e.g moral standards against theft, rape, enslavement,
murder etc.
• Moral standards are not established or changed by the
decisions of particular authoritative bodies. Laws and
legal standards are established by the authority of a
legislature or the decisions of voters. Moral standards,
however, are not established by authority nor does their
validity rest on voting procedures. Instead, the validity of
moral standards rests on the adequacy of the reasons
that are taken to support and justify them, so long as
these reasons are adequate, the standards remain valid.
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• Moral standards, should be preferred to
other values, including self-interest.
• Moral standards are based on impartial
considerations.
• Moral standards are associated with
special emotions (guilt, shame, remorse,
etc.).
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Normative and descriptive studies
• Ethics is not the only way to study
morality.
• The social sciences-such as
anthropology, sociology, and
psychology also study morality, but do
so in a way that is quite different from
the approach to morality.
• Although ethics is a normative study,
the social sciences engage in a
descriptive study of ethics.
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• Normative study is an investigation that
attempts to reach normative conclusion- that
is, conclusions of what things are good or
bad or what actions are right or wrong, it
aims to discover what should be.
• A descriptive study is the one that does not
try to reach any conclusion about what
things, are truly good or bad or right or
wrong. Instead it attempts to describe or
explain the world without reaching any
conclusions about whether the world is as it
should be.
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Business Ethics
• A specialised study of moral right and
wrong that concentrates on moral
standards as they apply to business
policies, institutions, organisations,
and behavior.
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Business ethics issues
The three basic types of issues
1. Systematic issues: Questions raised
about, political, legal, economical or
other social systems within which
businesses operate. For e.g
questions about the morality of laws.
Example:Questions about governments
direct negotiations for
purchasing products instead of
tender (government policies
that encourage
corruptions). 14
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Corporate issues: questions that are
raised about a particular company.
These include questions about the
morality of the activities, policies,
practices, or organisational
structure of an individual company
taken as a whole.
Example:Questions about morality of a
company’s corporate decision
to “qualify” products even
though there are flaws in
production.
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3.
Individual issues: questions about a
particular individual within an
organisation and their behaviors and
decisions. These include questions
about the morality of the decisions,
actions, or character of an
individual.
Example:Questions whether it was moral
to develop a product that would
probably not generate profit.
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Relativism
Egoism
The 4
Concepts of
Ethics
Utilitarianism
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Deontologism
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Business Ethics and Cultural
Differences
• 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
• Ethical relativism is the theory that, because
different societies have different ethical beliefs,
there is no universal 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 is
morally right or wrong.
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• Relativism holds that something is
right for the people or companies in
one particular society if it accords with
their moral standards and wrong for
them if it violates their moral standards.
• Moral codes demonstrates that there is
no one “right” answer to ethical
questions. The best a company can do
is to follow the old adage, “When in
Rome, do as the Romans do.” In other
words, there are no absolute moral
standards.
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Critics of ethical relativism
1.There are certain moral standards that the
members of any society must accept if that
society is to survive and if its members are to
interact with each other effectively.
• Thus all societies have norms against the
following:
• injuring or killing other members of the
society,
• norms about using language truthfully when
communicating with members of one’ society,
and
• norms against taking the personal goods of
other members of one’s society
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• Many apparent moral differences among
societies turn out on closer examination to
mask deeper underlying similarities.
• For e.g, anthropologists tell us that in some
Alaskan Inuit societies it was morally
acceptable for families to abandon their aged
to die outdoors during times of hardship,
whereas other societies felt they had a moral
obligation to protect and nurture their aged at
all times. Yet on close examination, it can
turn out that underlying the different practices
of both kinds of societies is a belief in the
same ethical standard: the moral duty of
ensuring the long term survival of the
community.
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• In their harsh environment, Inuit people may
have had no way of ensuring their
community’s survival when food supplies
ran short other than by abandoning their
aged. Other communities ensured their long
term survival by protecting the elders who
carried within them the knowledge and
experience the communities needed.
2. Because different people have different
moral beliefs about some issue, it does not
follow logically that there is no objective
truth about that issue nor that all belief about
that issue are equally acceptable.
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• When two people or two groups have different
beliefs, philosophers are fond of pointing out at least
one of them is wrong. For e.g the late philosopher
James Rachels put his case on the matter as
follows:
“The fact that societies have different moral codes
proves nothing. There is also disagreement from
society to society about scientific matters: in some
cultures it is believed that the earth is flat and
evil spirits cause diseases. We do not on that
account conclude that there is no truth in
geography or in medicine. Instead, we conclude
that in some cultures people are better informed
than in others. Similarly disagreements 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 the truth does not exist.”
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3. Ethical relativism has incoherent
consequences.
• If ethical relativism were true, opponents
claim, then it would make little sense to
criticize the practices of other societies so
long as their practices conformed to their
own standards. For example, we could not
say that:
• child slavery, as practiced in many parts of
the world, is wrong
• nor that the discrimination practiced in the
societies of apartheid South Africa in the 20th
century was unjust,
• nor that the Germans’ treatment of Jews in
the Nazi society of the 1930s was immoral.
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• Nor could we criticise the actions of businesses that
participate in these practices. For example, a
journalist recently discovered that IBM knowingly
supplied the data-processing machines that the
Nazis used to track down and exterminate Jews in
Germany and that its profits from doing business
with Nazis helped make it the successful company it
is today. Several oil companies, including Caltex
and Mobil, helped the South African government
exploit its oil resources in the 1980s knowing that
government would use the revenues to enforce the
apartheid regime that discriminated against blacks
and violated their civil rights.
• Is ethical relativism correct when it tells us that we
cannot say these companies acted unethically since
they were just following local standards?
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4. Opponents also claim that if ethical relativism were
correct, then it would also make no sense, in fact it
would be morally wrong to criticise any of the moral
standards or practices accepted by our own society.
• If our society accepts that a certain practice such as
slavery is morally right, then as members of this
society, we too must accept that practice as morally
right, and it is immoral for us to tell others in our
society to go against this belief because right and
wrong for us must be determined by the standards
of our society.
• According to critics, then, the theory of ethical
relativism implies that whatever the majority in one’s
society believes about morality is automatically
correct
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Lesson?
• The ethical relativism theory correctly
remind us that different societies have
different moral beliefs and that we
should not simply dismiss the moral
beliefs of other cultures when they do
not match our own.
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MORAL DEVELOPMENT AND
MORAL REASONING
Moral Development
• The psychologist Lawrence
Kohlberg, pioneered a
research in the field of moral
development over 20 years.
• He concluded that there is a
sequence of six identifiable
stages in the development of
a person’s ability to deal with
moral issues.
• He grouped these stages of
development into three levels,
each containing two stages.
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Who was Lawrence Kohlberg?
1927 - 1983
• Born in New York City in
1927.
• Graduated from the
University of Chicago in
one year.
• Attended Yale and
earned a PhD in
psychology.
• Became fascinated by
moral development in
children.
• Theorized six stages of
human moral
development.
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Heinz Steals the Drug
• In Europe, a woman was near death from a special
kind of cancer. There was one drug that the doctors
thought might save her. It was a form of radium that
a druggist in the same town had recently discovered.
The drug was expensive to make, but the druggist
was charging ten times what the drug cost him to
make. He paid $200 for the radium and charged
$2,000 for a small dose of the drug. The sick
woman's husband, Heinz, went to everyone he knew
to borrow the money, but he could only get together
about $ 1,000 which is half of what it cost. He told
the druggist that his wife was dying and asked him
to sell it cheaper or let him pay later. But the
druggist said: "No, I discovered the drug and I'm
going to make money from it." So Heinz got
desperate and broke into the man's store to steal the
drug-for his wife. Should the husband have done
that? (Kohlberg, 1963, p. 19)
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Six Stages of Moral Development
Level 1. Pre-conventional stages
• The Pre-conventional level is especially
common in children.
• The child is able to respond to rules and
social expectations and can apply the labels
good, bad, right, ad wrong.
• These rules, however, are seen as something
externally imposed on the self. Right and
wrong are interpreted in terms of the
pleasant or painful consequences of actions
or in terms of the physical power of those
who set the rules.
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Stage #1: Punishment and
Obedience Orientation
Morality is based upon the
physical punishment that
follows an action, rather
than right or wrong. The
concern is for self - "Will I
get into trouble for doing
(or not doing) it?" Good
behavior is associated
with avoiding punishment.
EX: The child won’t grab the
candy at the supermarket
for fear of being spanked.
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Stage #2: Instrumental and
Relative Orientation
• The concern is "What's in
it for me?" Action is
judged right if it helps in
satisfying one's needs or
involves a fair exchange.
EX: A mother tells her child:
“If you are quiet at the
mall, I will buy you an ice
cream.”
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Level 2. Conventional Stages
• The conventional level is typical of
adolescents and adults. They judge the
morality of actions by comparing these
actions to societal views and expectations.
• Maintaining the expectations of one’s family,
peer group, or nation is now seen as
valuable in its own right, regardless of the
consequences.
• The conventional level consists of the third
and fourth stages of moral development.
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Stage #3: Interpersonal
Concordance Orientation
People should live up to the
expectations of the family
and community and
behave in "good" ways.
Good behavior means
having good motives and
interpersonal feelings
such as love, empathy,
trust, and concern for
others.
EX: Volunteering at a
nursing home is the right
thing to do.
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• 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.
• Good behavior means having good motives and
interpersonal feeling such as love, empathy, trust
and concern for others.
• The morality of an action is judged by evaluating its
consequences in terms of a person’s relationships,
which now begin to include things like respect,
gratitude etc.
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Stage #4: Law and Order
Orientation
While stage three actions
are more concerned with
pleasing your family,
stage four is associated
with following society as a
whole. Emphasis is spent
on obeying laws to
maintain social order.
EX: If you drink and drive
your endangering the
lives of others on the
road, not just yourself.
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• 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 social duties.
• The emphasis is on obeying
laws, respecting authority,
and performing one’s duties
so that the social order is
maintained.
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Level 3. Post-conventional, Autonomous or
Principled Stages
• 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 views that
impartially takes everyone’s interests into
account.
• The person questions the laws and values that
society has adopted and redefines them in terms
of self-chosen moral principles that can be
justified in rational terms.
• If an adult at this stage is asked why something is
wrong, the person will respond in terms of what
has been decided through processes that are “fair
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to every one” or in terms of “justice,” or “society’s
overall welfare.”
• The post-conventional level, also known as the
principle level, consists of stages five and six of
moral development.
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Stage #5: Social Contract
Orientation
At stage 4, people want to
keep society functioning.
However, a smoothly
functioning society is not
necessarily a good one.
Nazi Germany was a well
organized society, but nine
million were murdered in
the process.
At stage 5, people begin to
EX: It is important for the
ask, "What makes for a
world to stop the killing in
good society?" They begin
to think about society
Darfur because we are
considering the rights and
morally obligated to stop
values that a society ought
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genocide.
to uphold.
• At this stage the person becomes
aware that people hold a variety of
conflicting personal view and opinions
and emphasises fair ways of reaching
consensus by agreement, contract, and
due process.
• Individuals are viewed as holding
different opinions and values.
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Stage #6: Universal Ethical
Principal Orientation
As human beings we are
obligated to live by the
principal that “all men are
created equal” regardless of
race, religion, sexual
orientation, or political
belief. Justice is universal,
so unjust laws must be
broken.
EX: Rosa Parks refused to sit
in the back of the bus
because it was an unjust
law discriminating against
African Americans.
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• At this final stage, right
action comes to be defined
in terms of moral
principles chosen because
of their logical
comprehensiveness,
universality, and
consistency.
• A person at this stage
wants all human beings to
be respected for their
dignity, believes in justice
and equality; will disregard
law if necessary
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• “We must learn that passively to accept an
unjust system is to cooperate with that
system, and thereby to become a
participant in tits evil.” Dr. Martin Luther
King Jr.
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Kohlberg's Stages of Moral Development:
• Consequence: making decisions based on
possible consequences
• Reward: making decisions based on possible
rewards
• Praise: making decisions to positively impact a
relationship
• Law and Order: making decisions based on rules
• Social Contract: making decisions based on
obligation to human rights, etc.
• Personal Guidelines: making decisions based on
personal guidelines developed for one's own life
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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.
• Two essential components of moral reasoning
1. An understanding of what reasonable moral
standards require, prohibit, value, or condemn
2. 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.
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• 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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•
The consistency requirement can be
phrased as follows:
If I judge that a certain person is
morally justified (or unjustified) in
doing A in circumstance C, then I
must accept that it is morally justified
(or unjustified) for any other person:
(a) To perform any act relevantly similar to A
(b) In any circumstances relevantly similar
to C.
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Arguments For and Against
Business Ethics
Three Objections to Bringing Ethics into Business
• Persons involved in business should singlemindedly pursue the financial interests of their firm
and not side track their energies or their firm’s
resources into “doing good works.” Three kinds of
arguments are advanced in support of this view.
1. 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.
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• To be profitable, each firm has to produce
only what the members of society want and
has to do this by the most efficient means
available.
• Questionable assumptions on which the
argument rests:
• The argument assumes that any steps taken
to increase profits will necessarily be
socially beneficial, when in fact several ways
of increasing profits actually injure society:
allowing harmful pollution to go
uncontrolled, deceptive advertising,
concealing product hazards, etc.
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• The argument assumes that, by producing
whatever the buying public wants (or values),
firms are producing what all the members of
society want, when in fact the wants of large
segments of society (the poor and
disadvantaged) are not necessarily met
because they cannot participate fully in the
marketplace.
2. Secondly, they claim that employees as
“loyal agents,” are obligated to serve their
employers single-mindedly, in whatever
ways will advance the employer’s selfinterest.
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• The argument can be paraphrased as follow:
– As a loyal agent of his or her employer, the
manager has a duty to serve the employer as the
employer would want to be served.
– An employer would want to be served in whatever
ways will advance his or her self-interests.
– Therefore, as a loyal agent of the employer, the
manager has a duty to serve the employer in
whatever ways will advance the employer’s selfinterests.
• Therefore, as a loyal agent of the employer,
the manager has a duty to serve the
employer in whatever way will advance the
employer’s self-interest.
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The loyal agent’s argument relies on several
questionable assumptions:
• The argument tries to show, again, that ethics
does not matter by assuming an unproved moral
standard that the employee has a duty to serve his
or her employer and there is no reason to assume
that this standard is acceptable.
• An agent’s duties are defined by what is called the
law of agency (i.e., the law that specifies the duties
of persons [agents] who agree to act on behalf of
another party and who are authorised by the
agreement to act).
• Agreements to serve another do not automatically
justify doing wrong on another’s behalf.
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3. The third objection is that, to be ethical it is
enough for business people merely to obey the
law and that business ethics is, essentially,
nothing more than obeying the law.
questionable assumptions:
• Law and morality do not always coincide and it is
wrong to see law and ethics as identical.
• It is true that some laws require behavior that is
the same as the behavior required by our moral
standards. For e.g laws that prohibit murder, rape
theft, fraud etc.
• Some laws have nothing to do with morality
because they do not involve serious matters. For
e.g parking laws
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• Other laws may even violate our moral
standards so that they are actually contrary
to morality. For e.g slavery law.
• This does not mean, of course, that ethics
has nothing to do with following the law.
• Our moral standards are sometimes
incorporated into the law when enough of us
feel that a moral standard should be
enforced by the pressures of a legal system.
• None of the arguments for keeping ethics out
of business seems forceful. In contrast,
there are fairly strong arguments for bringing
ethics into business.
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Arguments for bringing Ethics into Business
• Ethics should govern all voluntary human
activities and because business is a
voluntary human activity, ethics should also
govern business. In short, there is nothing
about business that would prevent us from
applying the same standards of ethics to
business activities that should be applied to
all voluntary human activities.
• Business activities like any other human
activities, cannot exist unless the people
involved in the business and it surrounding
community adhere to some minimal
standards of ethics.
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• All businesses require a stable society in
which to carry on their business dealings.
Yet the stability of any society requires
that its members adhere to some minimal
standards of ethics.
• One interesting argument actually claims
that ethical considerations are consistent
with business activities such as the
pursuit of profit. Indeed, the argument
claims that ethical companies are more
profitable than other companies.
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• Perhaps the most fascinating argument for
bringing ethics into business is the
prisoner’s dilemma.
• A prisoner’s dilemma is a situation in which
two parties are each faced with a choice
between two options: Either cooperate with
the other party or do not cooperate.
– If both choose not to cooperate, neither gets the
benefit.
– If one cooperates while the other chooses not to
cooperate, the one who cooperates suffers a loss
while the one who chooses not to cooperate gains
a benefit.
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• Though it may seem a bit stilted, close
examination will reveal that we all face such
dilemmas in our everyday lives.
• The prison dilemma demonstrates that
cooperation is more advantageous than
continuously trying to take advantage of
others at least when we will meet these
others again.
• This has significant implications for
business. Though a business might get
away with unethical behavior much of the
time, if retaliation is a real threat then such
behavior will impose costs that are greater
than ethical behavior would have been in the
first place.
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• Even self-interested organisations have a
good reason to be ethical in their business
dealings: it is in their long-term best
interests.
• In reality, of course, most people seem to be
social and so are also motivated by a
concern for the welfare of others. To the
extent that people are motivated by a
concern for others, they will probably behave
ethically.
• Finally, we should note that there is also a
good deal of evidence that most people so
value ethical behavior that they will punish
those whom they perceive to be behaving
unethically and reward those who are
perceived to be ethical
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Moral Responsibility and Blame
• Moral responsibility is directed
not only at judgements
concerning right or wrong.
Sometimes, they are directed
at determining whether a.
person or organisation is
morally responsible for having
done something wrong
• People are not always morally
responsible for the injuries
they inflict on others. A
person for example, who
injures someone by accident
is “excused” from any blame.
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By: Ms O.N Kangandjo
64
• So when is a person morally responsible or
to blame for an injury?
• Traditional: A person is morally responsible
for an injury when the person caused the
injury and did so knowingly and freely.
• However, this characterisation ignores the
fact that people are sometimes responsible
for injuries which they did not cause but
which they could and should have prevented,
that is they are morally responsible for their
omissions when they had a duty to act.
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By: Ms O.N Kangandjo
65
A person is morally responsible for an injury or a
wrong if:
1. The person caused or helped cause it (wrong or
injury), or failed to prevent it (wrong or injury)
when he could and should have done so,
2. The person did so knowing what he or she was
doing, and
3. The person did so of his own free will.
• The absence of any of these three elements will
completely eliminate a person’s responsibility
for an injury and so will fully “excuse” a person
from any blame for the injury.
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By: Ms O.N Kangandjo
66
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, or
2. The person did not know he was inflicting the injury
or the wrong, or
3.The person did not inflict the injury or the wrong of
his own free will.
• Although the absence of any of the three
requirements will completely remove a person’s
moral responsibility for a wrong, there are also
several “mitigating factors” that can lessen a
person’s moral responsibility depending on the
severity of the wrong.
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By: Ms O.N Kangandjo
67
Mitigating Factors
1. Circumstances that minimise but do not completely
remove a person’s involvement in an act (these affect the
degree to which the person actually caused or helped to
cause the wrongful injury),
2. Circumstances that leave a person uncertain but not
altogether unsure about what he or she is doing (these
affect the person’s knowledge), and
3. Circumstances that make it difficult but not impossible
for the person to avoid doing it (these affect the person’s
free will).
• The extents to which these mitigating circumstances can
diminish an agent’s responsibility depend on the
seriousness of the injury. Generally, the more serious
the injury, the less the mitigating circumstances will
lessen responsibility.
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By: Ms O.N Kangandjo
68
“Corruption destroys our good social,
ethical and moral standards and values.
Some of these standards and values are
trust, honesty, faith, integrity of our
calling, good image of a
person/institution, reputation and our
respectful standing in society.” Rev.
Gotthard Gurirab
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By: Ms O.N Kangandjo
69
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By: Ms O.N Kangandjo
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