Philosophy and ethics of business
Lecture 1
Morality: The norms, values and beliefs embedded in social processes which define right and
wrong. Morality: What’s right and wrong.
Ethics: A scientific discipline studying morality, applying reason to elucidate specific rules and
principles that determine right and wrong. Ethical theories are these rules and principles.
Types of ethical theories: Normative and descriptive.
-Normative ethics prescribes (instead of describes) morally correct way of acting. Normative is
what ought to be, making it often more subjective than descriptive ethics. g
-Descriptive ethics describe how ethics decisions are usually made in business; usually more
objective. It doesn’t touch what is right, what ought to be, but simply describes the different types
of decisions and moralities that exist.
Business ethics is a studying morality as it applies to business situations.
Different types of ethical issues:
-Systematic ethical issues: Social, political, legal or economic systems within companies operate.
-Corporate ethical issues: within a particular firm and its policies, culture, climate, actions etc.
-Individual ethical issues: a particular individual’s decisions, behaviour, and characteristics.
Three views on business ethics
-Corporations act intentionally like people and have moral rights and obligations and
responsibility. Humans themselves may be nice, but institutionally they contribute to a company
doing terrible things for example. A system can be bad without its members being evil.
-Attributing ethical qualities to corporations make no sense: they’re like machines, only humans
make the decisions and have ethical qualities.
-Corporations act intentionally and are thus morally responsible in what they do. However, ethical
qualities apply in a primary sense to humans making up the corporation as they decide for the
firm, and the firm only has ethical qualities in a derivative sense.
Shareholder versus stakeholder
Friedman states the firm’s only obligation is to maximise profits: Shareholder view.
-Moral responsibility of employees to make as much money as possible, and businesses
themselves have no moral responsibility; only humans within them.
-Shareholder interests are the only responsibility of managers.
-Social issues and problems are the responsibility of the state: the state must regulate to make
corporations allow them to act within the law to maximise profits.
All must be while conforming to the basic rules of society, law and ethical custom.
Friedman argues against CSR.
Edward Freeman argues for CSR: Stakeholder view. Stakeholders are anyone affected by or that
affect an organisation. Freeman argues they have legitimate claims towards the organisation, and
distinguishes two rights:
-Principle of corporate rights: corporation has obligation not to violate rights of others, e.g.
minimum wage.
-Principle of corporate effect: corporation is responsible for effects of actions on others.
Moral relativism states that no ethical standards are absolutely true and apply to all people,
companies, and societies.
However, some moral standards are found in all societies. Moral differences don’t logically imply
relativism: even with no common core in ethical standards, it doesn’t mean there’s no best
morality, it may just mean a lot of societies are wrong.
Relativism also has incoherent consequences, and privileges whatever moral standards are widely
accepted in a society.
The opposite is Integrative Social Contract Theory.
,Kolhberg’s development across all humans
Lawrence Kohlberg pioneered research on moral development, comparing not current differences
in society’s morals, but individual’s development over time: from infancy to adulthood, morality
develops in a shared sense by all human beings. He distinguishes 6 stages, or 3 levels of 2
stages, in morals.
-Pre-conventional: 1) Punishment-and-obedience orientation, determining if something is good
exclusively by being rewarded or punished.
2) Instrumental-relativist orientation recognises other’s wants and needs, and reciprocity to help
others in other to be satisfied yourself. Self-interest remains the focus: only help others since we
expect reciprocality.
-Conventional: 3) Interpersonal concordance, where what’s good depends on what other expect
of you and what helps others, e.g. what your family thinks.
4) Law and order orientation where right behaviour is doing your duty in society, doing what’s
legal and respecting authority to maintain social order. It disregards changing the law, simply
obeying the existing law and not questioning it.
-Post-conventional level. 5) Social-contract legalistic orientation, where we recognise different
moral views and define right actions in terms of fair agreement and social contract. We take into
account other views. All moralities are equal in the social-contract legalistic orientation
6) Universal-ethical-principle orientation, where logical, universal, consistent, abstract principles
define the right actions and determine the best moral principles: Not all moral views are equal in
the universal-ethical-principle orientation.
Carrol Gilligan and other criticism of Kohlberg
Gilligan states Kohlberg’s research was biased, since he used mostly male subjects. Gender bias
was rife. She again found the pre-conventional (punishment and reward) and conventional level
(law), but in the post-conventional level she found women were more oriented towards care-
ethics, not universal principles. So the connections you have with other human beings are the
most important determinants for orientation in morality.
Another often criticised point of Kohlberg is that he called it development, stating that each state
is better than the previous one: many found this to be without argument, as Kohlberg could never
justify why one stage would be ethically superior to others.
Ethical decision making: how we get from morals to actions
Recognition - Judgement - Intention - Behaviour.
We must recognise that we’re in a situation calling for an ethical solution.
Then we must judge which course of action is the morally right thing to do.
Then we must intent to do this morally just thing.
Lastly we must actually exhibit behaviour, as there might go something wrong between intentions
and actually executing certain behaviour.
Recognition can go wrong with moral disengagement: we might not recognise a situation as an
ethical situation. Different types of moral disengagement leading people to not recognise a
situation as ethical:
Euphemistic labelling makes a situation seem ethically unimportant through labelling something
as not ethically contentious. Advantageous comparison (he did something worse), displacement
of responsibility (just taking orders), diffusion of responsibility (I’m only a small part of the
problem), disregarding or distorting the consequences (effects won’t be that grave of my actions),
dehumanisation (no longer regarding humans as so, in order to make it easer to harm them), and
lastly attribution of blame (blaming the system, not ones self).
Biases in reasoning may cloud our judgement. Humans are bad at gauging causes and
consequences, and not great at judging risks (we ignore low-probability possibilities, e.g. ignoring
an oil-spill possibility since the odds were tiny).
We also have biases about other people: ethnocentrism, as we perceive our society to be correct
by default and others to be wrong. Stereotypes are another distortion of beliefs, impacting our
moral judgement in a negative way.
We also have illusion about ourselves: illusion of superiority, or the self-serving fairness bias.
Moral responsibility and blame: who’s to praise and blame?
Two kinds of responsibility:
,-Responsibility as an obligation: Focusses on the future, as we have some responsibility to fulfil a
duty in the future.
-Responsibility as blame or praise-worthiness: Focusses on the past, responsibility for doing
something right or wrong.
Responsibility requires causal influence, knowledge, and voluntarily doing something.
Chapter 1 - Ethics and Business
1.1 - The nature of business ethics
Ethics can be described as ‘the principles of conduct governing an individual or group’, or in our
context ethics is ‘the study of morality’. Morality are the standards than an individual or a group
has about what is right and wrong, or good and evil.
Moral standards are the norms about the kinds of actions believed to be morally right and wrong,
as well as the values placed on what we believe to be morally good and morally bad. Moral norms
can usually be expressed as general rules of action: ‘Always tell the truth’. Moral standards are
often taught young from family, friends, and societal influences like church, school, and media.
When older our experience, learning, and intellectual development will lead us to think, evaluate
and revise these standards.
Nonmoral standards and norms or conventional standards and norms include standards of
etiquette on manners, behavioural rules set by parents or other authorities, the law, and other
standards. Whenever we make judgements we use standards or norms of some kind, even when
judging how well a sport is being played using our standards for baseball. When we choose to
keep our well-paid job since we believe this is a good thing and therefor need to betray our moral
standards we choose nonmoral/conventional standards over moral standards.
Distinguishing moral from conventional norms is something humans can do from a very young
age; violations of moral norms are seen as more serious, while violations of nonmoral norms are
only seen as wrong when authorities set these norms; the moral norms apply independently from
what authorities say.
Six characteristics help pin down the nature of moral standards, differing them from conventional
norms:
-Moral standards deal with serious matters, things that seriously affect humans (injury, hurt).
-Should be preferred to other values including self-interest, so moral obligations should be fulfilled
even if it’s against one’s self-interest.
-Not established by authority figures.
-Felt to be universal: we expect everyone to abide by the same moral standards, even someone
on the other side of the world with completely different culture is seen as wrong when stealing.
Conventional norms are not universal: laws only apply within a jurisdiction.
-Based on impartial considerations: whether or not you benefit from certain actions is irrelevant of
whether or not we judge it to be morally right or wrong; we ignore interests.
-Associated with special emotions and vocabulary; shame, guilt.
Ethics is the discipline that examines one’s moral standards or the moral standards of a society to
evaluate their reasonableness and their implications for one’s life. So you start to do ethics when
you take the moral standards you absorbed from your surroundings and ask what these imply for
situations, whether these standards make sense, and if you should continue believing in them.
Apart from e.g. the obligation to tell the truth in your job and act consciously, you might also have
an obligation to earn money to provide for your family: does one outweigh the other? What about
the moral obligation to obey your employer. We often face questions of whether it is reasonable to
apply various moral standards to certain situations and which standards are the most important.
Ethics is a normative study: an investigation that attempts to reach conclusions about what things
are good or bd or about what actions are right or wrong. Normative studies aim to discover what
ought to be.
Social sciences are descriptive studies: investigations that attempt to describe or explain the
world without reaching any conclusions about whether the world is as it should be, so they
consider ethics without judgement about what’s right or wrong.
, Sociologists ask ‘Do Americans believe bribery is wrong?’ whereas ethicists ask ‘Is bribery
wrong?’.
Business ethics is a specialised study of moral right and wrong that concentrates on moral
standards as they apply to business institutions, organisations, and behaviour. We separate 3
kinds of issues business ethics investigates:
-Systematic issues in business ethics are ethical questions about economic, political, legal and
other institutions within which businesses operate.
-Corporate issues in business ethics are ethical questions about particular organisations: the
practices, activities, or organisational structure of a single company.
-Individual issues in business ethics are ethical questions raised about a particular individual
within a company and their behaviour and decisions.
Business ethics applies ethical or moral concepts to corporate organisations, but can we say that
acts of organisations are moral or immoral in the same way that human individual’s acts are? Or
does it only make sense to apply moral terms to individuals who make up an organisation. Moral
notions like responsibility, wrongdoing, and obligations may be hard to apply to groups such as
organisations, as they’re easier to apply to individuals. Two views represent two extremes:
On one side are those who argue that if something acted intentionally it is a moral agent, an agent
capable of having moral rights and obligations and being responsible for its actions, just like
humans. Corporations carry out actions intentionally, making them moral agents, and morally
responsible. Though this makes corporations moral agents and morally responsible, organisations
don’t act or intend in the same way as people do: they don’t act on their own, humans act for
them and form intentions for them.
The other extreme are those who hold that it makes no sense to hold companies morally
responsible or say they have moral duties as businesses are machines whose members must
blindly conform to formal rules that have nothing to do with morality. The problem with this
thought though is that, unlike machines, at least some members of an organisation usually know
what they’re doing and are free to change an organisation’s rules.
So we say corporations exist and act, like individuals, but are not human, so how can we apply
our moral categories to corporate organisations and their act? Corporations depend on humans
for their acts though, making these individuals the primary bearers of moral duty and
responsibility for what the corporation does.
Organisations have moral duties and responsibility in a secondary or derivative sense: a
corporation has a moral duty to do something only if some of its members have a moral duty to
makes sure it’s done. We mustn’t let the fiction of ‘the corporation’ obscure the fact that human
individuals control what the corporation does. Consequently, these human individuals are the
primary carriers of moral duties and responsibilities since they control what the corporation does.
These moral duties and responsibilities are attributed in a secondary sense to the corporation.
Corporate norms, culture, and policies however all enormously influence the behaviour of
employees, but the norms don’t make an employee’s choice for him and the corporation is thus
not responsible for an employee’s actions.
So business ethics is rationally evaluating our moral standards and applying them to business
situations. However, many people raise objective to applying moral standards to business:
financial interests should be the only interest pursued, some argue. 3 arguments for this:
-In perfectly competitive free markets, the pursuit of profit will ensure by itself that members of
society are served in the most socially beneficial ways. This argument rests on some questionable
assumptions though: perfect competition is rare;
increasing profits isn’t always socially beneficial, as pollution or price fixing demonstrate;
not all members of society see their wants met, especially not the poor and disadvantaged, since
they don’t participate fully in the marketplace;
and the argument assumes an unproved ethical standard, namely that managers should devote
themselves to single-minded profit pursuit, without arguing why.
-Loyal agent’s argument. As a loyal agent of one’s employer, the manager has a duty to serve the
employer as he’d want to be served. An employer wants to be served to advance his interests,
thus as a loyal agent of the employer the manager has a duty to serve him in whatever ways will
