Business Ethics

Lecture 1:

Ethics: The philosophical study of rules and principles that define right and wrong conduct. I.e
the code of behavior that is considered correct. (Comes from greek word Ethikos - Meaning
"Character")

Ethics VS. Morals (Important)

Ethics are provided by an external source and can correspond to things like the rules and
regulations of a company, while morals pertain to the personal beliefs and principles of a person
about right and wrong.

This is where the concept of "Ethical Relativism" comes from.

Ethical Relativism: The view that there are no ethical standards that are absolute and applicable
to every company/society/person.

Moral Standards: Norms about actions that are directly relevant to moral principles of people
and ethical considerations. I.e, Things that can benefit a human being at the expense of
someone else's greater harm etc.

Non-Moral Standards: Norms that pertain to judging actions as right and wrong without
considering moral or ethical perspectives. I.e rules in a game, etiquette, fashion.

Characteristics of Moral Standards:

1. About serious injuries and benefits

2. Universally applied (I.e if you think its fine to lie, then it should be fine for others to lie to you)
3. Unbiased (Impartial view)
4. Associated with special emotions/Vocab (Guilty, shame, remorse)
5. Moral standard by nature, not because it's established/forced by law. (i.e dressing laws in
saudi)
6. Preferable over Self-interest. (i.e not murdering someone for a gain)

Types of Ethical Issues:

1. Systemic = Ethical questions about the social, political, legal and economic system within
which companies operate
2. Corporate = Ethical questions about a particular coproration and its policies, culture, climate,
impact, or actions.
3. Individual = ethical questions about a particular individual's decisions, behavior, or character.

Why Ethics matter:

♦ They preserve rightfulness in the community
♦ White collar crimes are less likely in ethical environments
♦ Trust is promoted among employees, customers and investors
♦ An organization's behavior contributes to the well being of society (Prosocial behavior)
♦ Conflict is minimized in ethically consistent environments

Benefits of an Ethical Culture:

Ethical Culture promotes Employee trust, Investor Loyalty and Customer Satisfaction and Trust
which directly lead to higher profits.

Arguments Against/For Business Ethics:

Against:
1. Free markets ensure maximum social benefit in the pursuit of profit so its unnecessary
2. A manager's ethical obligations are secondary to his obligation to the company
3. Law already defines what the company needs to do to be ethical
For:
1. Ethics are universal, therefore applicable to all human activity
2. Businesses will die out without ethics and lose to companies that are ethical
3. Ethics promote profits (As shown by studies)
4. Customers/Investors/Employees care about ethics (As stated above in benefits)

Questions to consider:
Is it unethical for MNCs to be displacing workers in the regions that they expand to? What about
the inequality that it creates betwen nations? Do they have an obligation to improve standards
for local workers rather than sending their own?

Lecture 2:
Kohlberg's Model of Moral Development. (3 Stages)

1. Pre conventional Stage of Morality

• Punishment and Obedience Orientation (Obey to avoid punishment)
• Instrumental and Relative Orientation (Act selfishly to see whats in it for the person himself)
2. Conventional Stage of Morality
• Interpersonal Concordance Orientation (Doing things for the sake of being accepted/ to fit well
with loved ones and society)
• Law & Order Orientation (Ignoring personal bias etc/ not making exceptions and strictly
following the law to maintain societal peace.)

3. Post Conventional Stage of Morality (Principled)

•Social Contract Orientation (e.g life is more important than the law and the law should make
exceptions in this case. It's not fair to sentence a person for stealing to save a life. OR there can
be a principle such as that a person's right to their property is more important than the life of a
person; referring to heinz dilemma)
• Universal Ethical Principle Orientations (i.e self chosen ethical principles that appeal to a
person's logic. Golden Rule (do as you want others to do for you) applies here)

Kohlberg's views:

Stage 1: People see right and wrong based on laws and authority figures' sayings
Stage 2: People see right and wrong based on what is accepted in their immediate circles,
upbringing and culture. They do things that are expected from their norms and laws.
Stage 3: People judge right and wrong and take a critical look at the norms that they have been
brought up with. They will define right and wrong based on their own moral principles that they
have chosen out of their own reasoning rather than what has been chosen for them.

People at higher stages are more critical of their decisions and more rational than people stuck
at lower stages.

Three claims:
1. People at later stages have a wider perspective of right and wrong
2. Later stages have better ways of justifying their moral decisions
3. Post conventional stage people justify their moral choices on the basis of impartial/reasonable
moral principles as they are more critical which leads to more acceptance from a reasonable
person.

Criticism:
1. Kohlberg's views were mostly based on male subjects.
2. There is no objective way of saying that just because the lower stages have fewer
justifications, they are morally less sound than higher stages.
3. He claims that higher stages are morally preferable which cannot be justified.

Gilligan's Theory of "Female" Moral Development:

For women, morality is based on caring and responsibility. Moral development is about
progressing towards better ways of caring and responsibility.

Stages:
1. Pre- Conventional stage of caring only for self
2. Conventional stage of caring for others and neglecting self
3. Post Conventional stage of balancing self-care and care for others

Moral Reasoning
1. Standard to evaluate morality
2. Information to evaluate
3. A moral judgment about what's being evaluated

Steps leading to Ethical Behavior:

Step 1:
1. Greatness of Harm
2. Proximity to Victims
3. Immediacy of Harm
4. Does it violate most people's moral standards?
5. does it harm?
6. Likelihood of harm

Moral clouds: 1 Dehumanization, 2 Diffusion of Responsibility, 3 Attribution of Blame, 4

Distorting the harm, 5 Diplomatic labelling,6 justifying actions, 7 advantageous comparison, 8
displacement of responsibility

Step 2: Juding ethical course of action based on morality

Step 3: Deciding to do the already decided ethical course based on surroundings. A person that
knows the ethical course may or may not pursue it based on pressure
Step 4: Carrying out the ethical course of action based on one's willpower and locus of control

Three components:
1. Causality
2. Knowledge
3. Freedom
Factors that mitigate Moral Responsibility
1. Minimal Contribution
2. Uncertainty
3. Difficulty

Lecture 3:
Utilitarian Theory:
Judge actions as moral or immoral based on the net benefit that they provide
How to apply:
1. Determine alternative actions and policies
2. Estimate direct and indirect costs that actions can produce
3. Each action, subtract costs from benefits for net utility
4. Choose the one with net utility

Criticism of Utilitarianism

• Not all values can be measured quantifiably

• Critics say that it fails in terms of rights and justice (for same reason above)

Right: An Individual's right to be entitled to something.

• Legal = An entitlement through legal system
• Moral rights = Rights that all human beings possess simply by human beings (equal)

Moral Rights Features

Negative rights = reguire others to leave us alone (right to privacy)

Positive rights = require others help us (right to food, life, health)
Contractual = require others to keep their contract agreements (parties know what they're
agreeing to, no misrep, no coercion, no agreement to immorality)

Kant and Moral Rights:

Individuals should be left to pursue their interests and moral rights define what individuals
should be entitled to freely pursue.

An interest is important enough to be a right if: 1) we cannot let everyone be deprived of that
interest and 2) if that interest is needed to live as free and rational beings

Kant's two categorical imperatives:

1. Only reasons which would be willing to have anyone in a similar situation to act on (i.e
universally applicable)
2. Humans have dignity and therefore should not be used as a means to an end. Equivalent to
first formulation.

Criticism: Rights can conflict and Kant's theory cannot resolve them, both of his categorical
imperatives are unclear.

Lecture 4

Libertarian Philosophy: Freedom from human constraint is necessarily and all human constraints
are bad unless imposed to prevent other greater human constraints.

Robert Nozick's phiolosphy: Only moral right is the negative right to freedom.

Ethics of Care: Ethics need not be unbiased. Care for those who are dependant on us and related
to us. Since we require caring relationships, those relationships are valuable and should be cared
for.

Critcism: It can turn into favoritism but people argue that conflicting moral choices will always
have that

It can lead to burnout but people argue that with a good grasp of understanding of ethic of care,
people will acknowledge their own care as part of it as well.

Types of Justice:
• Distributive Justice - distribute benefits and burdens
• Retributive Justice - Impose punishments and penalties
• Compensatory Justice - compensation for wrongs and injuries

Principles of Distributive Justice

Fundamental - Distribute benefits and burdens equally
Egalitarian - Distribute equally to everyone
Capitalist - Distribute according to contribution
Socialist - Distribute according to need and ability
Distribute based on free choices
Distribute by equal liberty, equal opportunity, and needs of disadvantaged

•Aristotle - Virtues are habits that enable to live according to reason by habitually choosing
between extremes in actions etc
• Aquinas - Virtues are habits that nenable a person to lie reasonably in this world and be united
with god in the next
• MacIntyre -Virtues are dispositions that nebale a person to acvhieve the good t which human
practices aim
• Pincoffs - Virutes are dispositions we use when choosing between persons or potential future
selves.
Criticism - inconsistent with psychology that suggests external factors matter more

Lecture 5:
Types of ethics
Integrity: Adherence to ethical values

Honesty: Truthfullness. Disthonesty: lack of integrity, incomplete disclosure.

Specific issues:
Misuse of company resources (Includes time theft)
Abusive or Intimidating behavior (bullying)
Lying : Commission lying and omission lying
Conflicts of Interest: Choosing whether to advance personal goal or business goal
Bribery: Active = give Passive = receive (facilitation payments are legal because they're tiny like
presents and shit)

Corporate Intelligence: Collection of information by companies for the sake of advancing their
profitability/position
Ethical problems in CI:

Hacking, Social Engineering (using people's naivety to get access to passwords), Shoulder
surfing (Using the large hadron collider and quantum technology to compute a person's
password using their shoulder movements jk), password guessing, dumpster diving (looking at
corporate trash to find information), w-hacking (packet-sniffing on wireless networks),
eavesdropping
Discrimination
Sexual Harrassment: To stop sexual harassment, we need
1. Statement of Policy
2. Clear definition of SH
3. Non-retaliation Policy
4. Specific procedures to prevent
5. Victim empowerment
6. Established reporting procedure
7. Timely reporting requirement

Fraud:
1. Accounting Fraud
2. Puffery (Exaggerated ads)
3. Implied Falsity: Ad that deceives
4. Literally false

Consumer Fraud: When consumers try to bamboozle the company

1. Collusion: Partnering with an enployee to commit fraud
2. Duplicity: Mirroring a business (cloning) for profit
3. Guile: Using tricks

Insider Trading: Buying and selling stock in an insider's own company (Legal)

Illegal Insider trading = Buying or selling of stocks using information that is not publicly available
(i.e selling stocks right before you know shits about to go down)

Intellectual Property rights and privacy = Stealing copyrighted and patented things