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Business Ethics
Concepts & Cases
Manuel G. Velasquez
Copyright 2012 Pearson Education, Inc. All rights reserved.
Chapter One
Basic Principles: Ethics and Business
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The Nature of Business Ethics
Ethics: is the principles of conduct governing
an individual or group.
Personal ethics refer to the rules by which an
individual lives his/her personal life.
Ethics is a kind of investigation and includes
both the activity of the investigation as well as
the result of the investigation, whereas
morality is the subject matter that ethics
investigates.
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Ethics and Morality
Ethics is the study of morality.
Morality = The standards that an individual or a group has
about what is right and wrong, or good and evil.
Example: B.F. Goodrich A7-D Fraud
Moral Standards = norms about the kinds of actions that we
believe are morally right or morally wrong, as well as the
values placed on what is morally good or bad. Such as (
always tell the truth).
Non-Moral Standards: The standards by which we judge
what is good or bad and right or wrong in a non-moral way.
Such as etiquette (respect others feeling), law, and
language.


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Five Characteristics of Moral
Standards
Involve significant injuries or benefits like has moral
standards against ( murder, children abuse, fraud, theft)
Not established by authority figures (it doesnt change
depend on what someone wants, but depends on the reasons
that are taken to support and justify them).
Should be preferred to other values including self-interest.
( it doesnt mean that its wrong act, but it is wrong to choose
self interest over morality).
Based on impartial considerations (lying to get benefit)
Associated with special emotions and vocabulary. (guilt,
shame, remorse = regret)
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What is Business Ethics?
Broadly, ethics is the discipline (correction or training or path)
that examines ones moral standards or the moral standards of
a society to evaluate their reasonableness and their
implications for ones life. It asks how we apply these standard
in our life.
The aim of ethics is to develop a body of moral standards that
we are reasonable to hold.
Business ethics is a specialized study of moral right and wrong
that concentrates on moral standards as they apply to business
institutions, organizations, and behavior.
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Types of Ethical Issues
Systemicethical questions about the social,
political, legal, or economic systems within which
companies operate. (Included laws, regulation and
industrial structures).
Corporateethical questions about a particular
corporation and its policies, culture, climate, impact,
or actions. (About morality of activities , policies and
practice)
Individualethical questions about a particular
individuals decisions, behavior, or character. (Include
the morality of decisions , action, or character of an
individual).

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Can ethical qualities be attributed to
corporations?
View #1: corporations, like people, act intentionally
and have moral rights, and obligations, and are morally
responsible.
View #2: it makes no sense to attribute ethical qualities
to corporations since they are not like people but more
like machines; only humans can have ethical qualities.
View #3: humans carry out the corporations actions so
they are morally responsible for what they do and
ethical qualities apply in a primary sense to them;
corporations have ethical qualities only in a derivative
sense.
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Arguments Against Business Ethics
In a free market economy, the pursuit of profit
will ensure maximum social benefit so
business ethics is not needed. (Like bribery,
fraud, deceptive advertising or concealing
products hazard).
A managers most important obligation is
loyalty to the company regardless of ethics.
So long as companies obey the law they will
do all that ethics requires.
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Arguments Supporting Business Ethics
Ethics applies to all human activities.
Business cannot survive without ethics.
Ethics is consistent with profit seeking.
Customers, employees, and people in general
care about ethics.
Studies suggest ethics does not detract from
profits and seems to contribute to profits.
http://www.dailymail.co.uk/news/article-2563015/WVa-pizza-worker-caught-
urinating-sink-fired.html
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Corporate Social Responsibility
Corporate social responsibility refers to a
corporations responsibilities or obligations
toward society. (Pollution)
Business ethics is both a part of corporate
social responsibility and part of the
justification for corporate social responsibility.
Shareholder vs. Stakeholder Theory
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New Issues in Business Ethics
Advances in technology often create new
issues for business ethics.
Currently, advances in information technology are
creating new issues in business ethics.
Increasing connections between the economic
and social systems of different nations, known
as globalization, has also created new issues
in business ethics.
http://education-portal.com/academy/lesson/impact-of-technology-on-
privacy.html#lesson
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Resolving Cross-Cultural Ethical
Differences
Moral Relativism = the theory that there are no ethical
standards that are absolutely true and that apply or should be
applied to the companies and people of all societies. Ethics are
different from society to another.

Objections to Moral Relativism:
Some moral standards are found in all societies;
Moral differences do not logically imply relativism;
Relativism has incoherent consequences;
Relativism privileges (distinguish) whatever moral
standards are widely accepted in a society.
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Resolving Cross-Cultural Ethical
Differences
According to the Integrative Social Contracts
Theory (ISCT), there are two kinds of moral
standards:
Hypernorms: those moral standards that should be
applied to people in all societies.
Microsocial norms: those norms that differ from
one community to another and that should be
applied to people only if their community accepts
those particular norms.
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Cont
Hypernorms take priority over microsocial
norms.
When the manager is operating in foreign
community , he/her should follow the
microsocial norms of the community. So long
as the do not violate any hypernorms. But if
the microsocial norms violate the hypernorms
the manager should not follow the microsocial
norms.
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Lawrence Kohlbergs Three Levels of Moral Development
First Level: Pre-conventional Stages
Stage One: punishment and obedience orientation
Stage Two: instrumental and relative orientation
Example to punish the child for good thing and to
reward him for good thing.
Second Level: Conventional Stages
Stage One: interpersonal concordance orientation
Stage Two: law and order orientation
Example, to be good son/daughter for your family, to
be the loyal to your own larger nation or society or
society duties.
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Cont
Third Level: Post-conventional Stages
Stage One: social contract orientation
Stage Two: universal principles orientation
Example, the person aware that everyone has his opinion
or view and they can reach consensus by agreement or
contract. The last stage is reaching to the right action
by comprehensiveness and universality .
Gilligan and kohlberg agreed that we cratically and
reflectively examine the adequacy of our moral standards.
Therefore, the central aims of ethics is the stimulation of
this moral development by discussing, analyzing the
moral reasoning that we and other do .
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Moral Reasoning
The reasoning process by which human
behaviors, institutions, or policies are judged
to be in accordance with or in violation of
moral standards.
Moral reasoning involves:
The moral standards by which we evaluate things
Information about what is being evaluated
A moral judgment about what is being evaluated.
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Four Steps Leading to Ethical
Behavior
Step One: Recognizing a situation is an ethical
situation.
Requires framing it as one that requires ethical
reasoning
Situation is likely to be seen as ethical when:
involves serious harm that is concentrated, likely, proximate,
imminent or near to done, and potentially violates our moral
standards
Obstacles to recognizing a situation:
Euphemistic labeling, justifying our actions, advantageous
comparisons, displacement of responsibility, diffusion of
responsibility, distorting the harm, and dehumanization, and
attribution of blame.
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Four Steps Leading to Ethical
Behavior
Step Two: Judging the ethical course of action.
Requires moral reasoning that applies our moral
standards to the information we have about a
situation.
Requires realizing that information about a
situation may be distorted by biased theories about
the world, about others, and about oneself.
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Four Steps Leading to Ethical
Behavior
Step Three: Deciding to do the ethical course
of action.
Deciding to do what is ethical can be influenced
by:
The culture of an organizationpeoples decisions to do
what is ethical are greatly influenced by their
surroundings.
Moral seductionorganizations can also generate a
form of moral seduction that can exert subtle
pressures that can gradually lead an ethical person into
decisions to do what he or she knows is wrong.
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Four Steps Leading to Ethical
Behavior
Step Four: Carrying out the ethical decision.

Factors that influence whether a person carries out
their ethical decision include:

Ones strength or weakness of will

Ones belief about the locus of control of ones actions
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Moral Responsibility
Three Components of Moral Responsibility
Person caused or helped cause the injury, or failed
to prevent it when he or she could and should have
(causality).
Person did so knowing what he or she was doing
(knowledge).
Person did so of his or her own free will
(freedom).
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Factors that Mitigate Moral
Responsibility
Minimal contribution
In general, the less ones actual actions contribute to the outcome
of an act, the less one is morally responsible for that outcome.
Uncertainty
A person may be fairly convinced that doing something is wrong
yet may still be doubtful about some important facts, or may
have doubts about the moral standards involved, or doubts about
how seriously wrong the action is.
Difficulty
A person may find it difficult to avoid a certain course of action
because he or she is subjected to threats or duress of some sort or
because avoiding that course of action will impose heavy costs
on the person.