Business Ethics

SM131: Business Ethics

Reading Selections on Business Ethics from LibreTexts Business Law (Ch 3)

Section 3.2: What Is Ethics?
Learning Objectives

  • By the end of this section, you will be able to:

    • Explain how both individuals and institutions can be viewed as ethical or unethical.

    • Explain how law and ethics are different, and why a good reputation can be more important than legal compliance.

Definitions and Concepts

  • Ethics and Morality:

    • Ethics and morality are often used interchangeably, though some distinctions are made:

    • Morality may be viewed as personal, while ethics typically has wider social implications.

    • Ethics can be seen as morality applied to specific subjects, e.g., business ethics, journalistic ethics, professional ethics.

  • Moral Responsibility:

    • Individuals are generally seen as having a conscience or soul, while corporations and nations' moral responsibility is less clear.

    • Common moral judgments about nations or corporations reflect perceptions of their actions (e.g., labeling some as 'evil' or 'corrupt').

  • Understanding Good:

    • The term "good" can be ambiguous; it can refer to various attributes beyond ethical or moral values,

      • Examples include business success or market position.

    • Ethical judgments are often more clearly defined (e.g., honesty, caring, social responsibility).

Key Points about Morality and Ethics

  1. Morals and ethics are not precisely measurable, yet humans generally agree on what actions can be deemed ethical or moral.

  2. Humans value ethical individuals and prefer to interact with them.

  3. Legal compliance does not equate to ethical behavior; legal actions may not always be ethically sound.

Ethical Challenges in Business

  • Recognizing ethical problems, making clear decisions, and having the courage to act is often more complicated in organizational contexts due to varied individual motivations and loyalties.

  • There is no universally accepted methodology for creating an ethically supportive organization that fosters respect and accountability among employees.

Intersection of Law and Ethics

  • Legal Compliance vs. Moral Excellence:

    • Legal compliance refers to following laws, which sets a minimal ethical standard.

    • People often prefer providers who demonstrate moral excellence over mere legal compliance.

    • Business ethicists assert that legal actions are not always ethical; for instance, legal loopholes may enable unethical practices.

  • Reputation and Goodwill:

    • Proposition: Individuals and organizations possess reputations; moral reputation is tied to perceptions of integrity and fairness.

    • Goodwill is cultivated through positive actions and is crucial for an organization's valuation, often impacting its market worth during sales.

  • Laws Reflect Moral Views:

    • Laws are designed to express society's views on morality, e.g., prohibitions against Medicare fraud or assisting suicide.

    • Legal resolutions to societal issues may reflect underlying moral perspectives and activate public debates;
      contemporary examples include stem cell research, medical marijuana, and abortion.

  • Moral Perspectives in Public Policy:

    • Differing perspectives on rights, social utility, virtue, and justice shape public discourse and often lead to societal division over values rather than facts.

Section 3.3: Major Ethical Perspectives

Learning Objectives

  • By the end of this section, you will be able to:

    • Describe various theories of ethics in human decision-making.

    • Consider major ethical theories as they apply to difficult life and business choices.

Ethical Theories

  1. Utilitarianism:

    • Founded by Jeremy Bentham and expanded by John Stuart Mill.

    • Focuses on outcomes rather than rules; an action is considered good if it maximizes happiness for society.

    • Act Utilitarianism: Determines which specific action will yield the greatest good.

    • Rule Utilitarianism: Asks which rule will tend to promote maximal happiness if followed regularly.

    • Utilitarian analysis is widely used in regulatory frameworks and business decisions, but practitioners often misapply its principles, focusing excessively on personal or corporate gain rather than societal good.

  2. Deontology:

    • Originated from the works of Immanuel Kant, emphasizes duties and moral intent over outcomes.

    • Duty is derived from rational thought and universalizable principles; true ethical conduct aligns with inherent equality among all humans.

    • Ethical actions must meet the requirements of consistency and reversibility—whether the action is universally acceptable (i.e., if it should be permissible for all).

  3. Social Justice Theory and Social Contract Theory:

    • Addresses issues of distributive justice—how goods should be allocated fairly among society.

    • Differentiates between needs-based distribution (Marxist thought) and voluntary exchange (Capitalist thought).

    • Discussions on social contracts emphasize mutual duties between government and citizens, and between corporations and society, reflecting current dynamics like corporate responsibilities and civic duties.

  4. Virtue Theory:

    • Focuses on the development of virtuous characteristics (virtues) rather than rules or consequences.

    • Aristotle framed virtue ethics around the pursuit of personal excellence and defined happiness as the rational, active pursuit of virtue.

    • Identified virtues such as courage, temperance, and generosity, stressing that individuals can only achieve true character by consistently practicing these virtues.

Core Values Analysis

  • Michael Josephson’s Core Values:

    • Identified essential ethical traits valued across various communities in the U.S. that include:

    1. Trustworthiness

    2. Respect

    3. Responsibility

    4. Fairness

    5. Caring

    6. Citizenship

  • These core values are distinctively ethical and often evoke common agreement regarding moral conduct but may diverge culturally based on personal beliefs.

Business Reputation and Ethics

  • Organizations often lose market value and reputation due to unethical conduct.

  • A proactive approach to ethics, including appointing ethics and compliance officers, has become increasingly essential for maintaining a good reputation which is critical in today’s business environment.

  • For individuals, consistently practicing virtues fosters a culture of habitually ethical actions, paralleling corporate learning toward values-driven practices.