Welcome to module one

Business Ethics
 Meaning of Business Ethics
• Ethics refers to the principles
and standards of moral
behaviour that are accepted by
society as right versus wrong.
 Ethics defined
• Ethics can also be defined as
“the rules or standards
governing the conduct of a
person or the members of a
profession e.g. auditing ethics,
medical ethics”.
 Ethics explained

•Ethics is “the
study of morality.”
 Ethics and morality
• Although ethics deals with morality, it is
not quite the same as morality. Ethics is
a kind of investigation and that includes
both the activity of investigating as well
as the results of that investigation
whereas morality is the subject matter
that ethics investigates.
 Ethics explained

• ETHICS are the rules

of personal
• behaviour accepted
by society.
 Morality
• We can define morality as the
standards that an individual or a
group has about what is right
and wrong, or good and evil.
 morality
• Moral standards include the norms
we have about the kinds of actions
we believe are morally right and
wrong as well as the values we
place on the kinds of actions we
believe are morally good and
morally bad.
 morality
• Moral norms can usually be
expressed as general rules or
statements, such as “Always tell
the truth,” “It is wrong to kill
innocent people,”
 morality

• or
• “Actions are right to the
extent that they produce
happiness.”
 Sources of morality
• Typically, a person’s
• Moral standards are first imbibed as
a child from family, friends and
various societal influences such as
church, school, television,
magazines, music and associations.
 morality
• Later, as the person grows up,
experience, learning and intellectual
development may lead the maturing
person to revise these standards.
Some are discarded and new ones
may be adopted to replace them.
 morality
• Through this maturing process,
the person may develop
standards that are more
intellectually adequate and so
more suited for dealing with the
moral dilemmas of adult life.
 Nature of moral standards

• ethicists have suggested five

characteristics that help to pin
down the nature of moral
standards.
 Nature of moral standards
• First, moral standards deal with
• matters that we think can seriously
injure or seriously benefit human
• beings.
 Nature of moral standards
• For example, most people in
Zimbabwe hold
Some standards against theft, rape,
enslavement, murder, child abuse,
assault,
slander, fraud, lawbreaking, and so
on.
 Nature of moral standards
• Second, moral standards are not
established or changed by the
decisions of particular
authoritative bodies.
 Nature of morality
• Laws and legal standards are
established by the authority of a
legislature or the decisions of
voters.
 Nature of morality
• Moral standards, however, are not
established by any 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;
 Nature of morality
• Third, and perhaps most striking,
we feel that moral standards
should be preferred to other
values including (especially) self-
interest.
 Nature of morality
• That is, if a person has a moral
obligation to do something, then he or
She must do it even if this conflicts with
other, non-moral values or
self-interest.
 Nature of morality
• Fourth, and generally, moral standards
are based on impartial considerations.
The fact that you will benefit from a lie
and that I will be harmed is irrelevant to
whether lying is morally wrong or not.
 Nature of morality
• Although morality says that we
should be impartial in those
contexts where justice is called for,
such as assigning salaries in a public
company; it also identifies certain
contexts:
 Nature of morality
• , such as
• taking care of family members,
where preferential caring for
individuals may be morally
legitimate and perhaps even morally
required.
 Philosophy of morality
• Last, moral standards are
associated with special emotions
and a special
• vocabulary.
 Philosophy of morality
• For example, if I act contrary to a
moral standard, I will normally feel
guilty, ashamed, or remorseful; I will
characterise my behaviour as
“immoral” or “wrong” and I will feel
bad about myself and experience
loss of self-esteem.
 Ethics and the Law
• Many of the most important ethical
values form the basis for legislation
which governs business activity in
general.
 Ethics and the Law
• However, while ethics deals
• with personal moral principles and
values, laws express the standards
of a society that can actually be
enforced in court.
 Ethics and the Law
• Often, there is fine
• judgment to be made. If behaviour
is not subject to legal penalties and
• seems reasonably ethical, it is still
acceptable.
 Ethics and the Law
• Using the framework of ethics and
the law, a business may be strictly
operated on principles which strive
to be: • Ethical and legal: Legal and
ethical actions are both acceptable
within the legal framework and
societal norms.
 Ethics and the Law
• For example, any company with a
moral and legal conduct falls into
this category. This category involves
private firms that are licensed in
Zimbabwe which are equally into
legal business e.g. legal chambers,
auditing firms.
 Legal and unethical
• Legal and unethical is when the law
supports what you are doing but it
is unethical because the society
frowns at it; e.g. the sale and use of
tobacco products (cigarettes and
cigars).
 Ethical but illegal:

• publishing stolen but

revealing documents
about government
mismanagement).
 Ethical but illegal
• Ethical but illegal patterns of
behaviour also include offer of
bribes (incentives) in order to
• secure a contract. In Zimbabwe,
offering of bribe is seen as a way of
life.
 Unethical and illegal:
• making offerings that have been
outlawed and are against
societal norms, for example, the
drug trade.
 Unethical and illegal:
• Employing child labour is also
illegal and unethical. The law
does not support it and it is
• also unethical because the
society frowns at it,
 Unethical and illegal:
• e.g. marketing and consumption
of cocaine and other hard drugs
are banned and seen as
unethical in Zimbabwe and most
countries. Abortion is illegal and
unethical in Zimbabwe.
 Laws and regulations
• Therefore, laws and regulations exist to
achieve the following:
• • Protect consumers
• • Regulate competition
• • Protect organisations from each other
• • Protect the society
 Significance of Business Ethics

• • Consumers are, arguably, more likely to buy from a

company
• which can be seen to be acting ethically.
• • Graduates are more likely to be attracted to
companies which
• treat their employees fairly and give customers a fair
deal.
• • Ethical business practice is a means of forestalling
legislation and
• stringent government regulations.
 Significance of Business Ethics

• Business ethics requires

companies doing their bit to
contribute towards a just and
fair society, while also ensuring
that environmental pollution is
brought under control.
 Significance of Business Ethics

• Another significance of business

ethics stems from the fact that
businesses need to retain the vast
amount of social power entrusted to
them by the public.
 Influences on Business Ethics

• The extent of ethical

behaviour of businesses is
influenced by the
• following factors:
 1.Cultural differences:
• Culture is the way of life of people
and transmitted from one
generation to another. The extent of
ethical behaviour is therefore a
function of the culture of a
particular country.
 2.Knowledge:
• Greater knowledge increases the chance
of making the right decision. Business
decisions not based on facts or a clear
understanding of the consequences
could harm employees, customers, the
company, and other stakeholders.
 3.Organisational behaviour:
• The foundation of an ethical business
• climate is ethical awareness and clear
standards of behaviour. Companies that
strongly enforce company codes of
conduct and provide ethics training help
employees recognise and reason
through ethical problems.
REFERENCES/FURTHER READINGS
• Jack N. Behrman, (1988). Essays on Ethics in Business and
the Professions. Englewood Cliffs, NJ: Prentice Hall.

• Norman E. Bowie, (1999). Business Ethics, A Kantian

Perspective. Blackwell.

• Sterling Harwood, (1996). Business as Ethical and Business

as Usual. Belmont, CA: Wadsworth Publishing.

• De George, Richard T. (1999). Business Ethics: Prentice Hall.

 Business Ethics
• Business ethics is a study of moral
standards and how these apply to the
social systems and organisations
through which modern societies
• produce and distribute goods and
services and to the behaviours of the
people who work within these
organisations.
 Concept of Ethical Conduct
• 1.Competing fairly and honestly:
Businesses are expected to compete
fairly and honestly and not
knowingly deceive, intimidate, or
misrepresent customers,
competitors, clients, or employees.
 Concept of Ethical Conduct
• 2.Communicating truthfully: Ethical conduct
requires that companies refrain from issuing
false or misleading communications.
Businesses should recognise that their
• communications reflect their image and
therefore refrain from untruthful, offensive
and misleading communications.
 Concept of Ethical Conduct
• Not causing harm to others: Some business
executives put their own personal interests
ahead of that of employees and shareholders
thereby causing harm to them. Corporate
managers can mislead investors by
withholding vital information; they
sometimes take advantage of the investor by
using the company’s earnings or resources
for personal gain.
 Code of Conduct
• A code of conduct is a written
statement setting forth the
principles that guide an
organisation’s decision. An effective
code of conduct requires
• the following:
 Code of Conduct
• Top management commitment
• • Employee communications efforts
• • Employee commitment to follow it
• • Formal training programmes
• • A system that supports reporting unethical
or illegal actions at work
• • A system of action.
 Ethics coverage

•Ethical standards
would typically
cover matters such
as:
 Ethics coverage
• Contribution or payment to government
officials or political parties
• • Relations with customers or suppliers
• • Conflicts of interest
• • Accuracy of records
• • Fair and acceptable human resource practices
• • Competition matters
• • Corporate social responsibility.
 Theories of Business Ethics
• Ethical theories provide part of the decision-
making foundation for Decision Making When
• Ethics Are In Play because these theories
represent the viewpoints from which
individuals
• seek guidance as they make decisions
 ETHICAL PRINCIPLES
• The principle of beneficence: This principle
stipulates that ethical theories should strive
to achieve the greatest amount of good
because people benefit from the most good.
This principle is mainly associated with the
utilitarian ethical theory discussed later in
this set of notes.
 2.Least Harm
• least harm deals with situations in
which no choice appears beneficial.
In such cases, decision makers seek
to choose to do the least harm
possible and to do harm to the
fewest people
 3.Respect for Autonomy
• This principle states that decision making
should focus on allowing people to be
autonomous— to be able to make decisions
that apply to their lives. Thus, people should
have control over their lives as much as
possible because they are the only people
who completely understand their chosen
type of lifestyle.
 justice ethical principle
• The justice ethical principle states that
decision makers should focus on actions that
are fair to those involved. This means that
ethical decisions should be consistent with
the ethical theory unless extenuating
circumstances that can be justified exist in
the case.
 FORMS OF ETHICAL THEORIES
• Deontology
• Utilitarianism
• Rights
• Virtue
• Stakeholder Theories
• Social Contract Theory
• Legitimacy Theory
 2.Deontology
• The deontological class of ethical
theories states that people should
adhere to their obligations and
duties when engaged in decision
making when ethics are in play.
 deontology
• This means
• that a person will follow his or her
obligations to another individual or society
because
• upholding one’s duty is what is considered
ethically correct. For instance, a deontologist
• will always keep his promises to a friend and
will follow the law.
 deontology
• A person who adheres to
deontological theory will produce
very consistent decisions since they
will be based on the individual’s set
duties.
 Limitations of deontology
• Deontology contains many positive attributes,
but it also contains flaws. One flaw is that
• there is no rationale or logical basis for deciding
an individual’s duties. For instance, a
businessperson
• may decide that it is his/her duty to always be
on time to meetings. Although this
• appears to be something good, we do not know
why the person chose to make this his duty.
 2.Utilitarianism
• Utilitarian ethical theories are based on
one’s ability to predict the
consequences of an action. To a
utilitarian, the choice that yields the
greatest benefit to the most people is
the one that is ethically correct.
 2.Utilitarianism
• There are two types of utilitarianism, act
utilitarianism and
• rule utilitarianism. Act utilitarianism
subscribes precisely to the definition of
utilitarianism—
• a person performs the acts that benefit the
most people, regardless of personal
• feelings or the societal constraints such as laws
 2.Utilitarianism
• . Rule utilitarianism takes into account the
• law and is concerned with fairness. A rule
utilitarian seeks to benefit the most people
but through the fairest and most just means
available. Therefore, added benefits of rule
utilitarianism are that it values justice and
includes beneficence at the same time.
 Weaknesses of Utilitarianism
• Both act and rule utilitarianism have
disadvantages. Uncertainty can lead to
unexpected results making the utilitarian
decision maker appear unethical as time
passes, as the choice made did not benefit
the most people as predicted.
 Weaknesses of Utilitarianism
• Another assumption that a utilitarian decision
maker must make concerns his/her ability
• to compare the various types of consequences
against each other on a similar scale. But,
• comparing material gains, such as money,
against intangible gains, such as happiness, is
• very difficult since their qualities differ to such
a large extent.
 3.Rights

• In ethical theories based on rights, the rights

established by a society are protected and
• given the highest priority. Rights are
considered to be ethically correct and valid
since a
• large population endorses them.
 3.Rights

• Individuals may also bestow rights upon

others if they have the ability and resources
to do so. For example, a person may say that
her friend may borrow her laptop for the
afternoon. The friend who was given the
ability to borrow the laptop now has a right
to the laptop in the afternoon.
 Weaknesses of rights
• A major complication of this theory on a
larger scale is that one must decipher what
the characteristics of a right are in a society.
The society has to determine what rights it
wants to uphold and give to its citizens. In
order for a society to determine what rights
it wants to enact, it must decide what the
society’s goals and ethical priorities are.
 Weaknesses of rights
• Therefore, in
• order for the rights theory to be useful, it must be used
in conjunction with another
• ethical theory that will consistently explain the goals of
the society. For example in
• America people have the right to choose their religion
because this right is upheld in the
• Constitution. One of the goals of the Founding Fathers’
of America was to uphold this
• right to freedom of religion.
 3.Virtue
• The virtue ethical theory judges a person by
his/her character rather than by an action
• that may deviate from his/her normal
behavior. It takes the person’s morals,
reputation, and motivation into account when
rating an unusual and irregular behavior that
is considered unethical.
 3.Virtue
• For instance, if a person plagiarized a passage
that was later detected by
• a peer, the peer who knows the person well will
understand the person’s character and will
• judge the friend accordingly. If the plagiarizer
normally follows the rules and has good
• standing amongst his colleagues, the peer who
encounters the plagiarized passage may be
• able to judge his friend more leniently.
 Weaknesses of virtue
• One weakness of virtue ethical theory is that
it does not take into consideration a person’s
• change in moral character. For example, a
scientist who may have made mistakes in the
• past may honestly have the same late night
story as the scientist in good standing.
 Weaknesses of virtue
• Neither
• of these scientists intentionally plagiarized,
but the act was still committed. On the other
• hand, a researcher may have a sudden
change from moral to immoral character may
go unnoticed until a significant amount of
evidence mounts up against him/her.
 Stakeholder Theories
• The stakeholder theory of the firm is used as a basis
to analyse those groups to whom the firm should be
responsible. In this sense, the firm can be described
as a series of connections of stakeholders that the
• managers of the firm attempt to manage. A
stakeholder is any group or individual who can affect
or is affected by the achievement of the
organisation’s objectives. Stakeholders are typically
analysed into primary and secondary stakeholders.
 Stakeholder Theories
• A primary stakeholder group is one
• without whose continuing participation the
corporation cannot survive
• as a going concern. A primary group includes
shareholders and
• investors, employees, customers and
suppliers, together with what is
• defined as the public stakeholder group:
 Stakeholder Theories
• the governments and
• communities that provide infrastructures and
markets, whose laws and
• regulations must be obeyed, and to whom
taxes and obligations may be
• due.
 Stakeholder Theories
• The secondary groups are defined as those
who influence or affect,
• or are influenced or affected by the
corporation, but they are not
• engaged in transactions with the corporation
and are not essential for its
• survival.
 Social Contract Theory
• The social contract theory has a long tradition
in ethical and political theory. In general, this
theory considers the society as a series of social
• contracts between members of society and
society itself. The social contact theory in
business ethics argues that corporate rights and
• responsibilities can be inferred from the terms
and conditions of an imaginary contract
between business and society.
 Legitimacy Theory
• Legitimacy is defined as a generalised
perception or assumption that the
• actions of an entity are desirable,
proper, or appropriate within some
• socially constructed system of norms,
values, beliefs and definitions.
 Legitimacy Theory
• There are three types of
organisational legitimacy:
• • Pragmatic
• • Moral
• • Cognitive.
 Legitimacy Theory
• Finally, an organisation may employ four
broad legitimating strategies when faced
with different legitimating threats:
• Seek to educate its stakeholders about the
organisation’s
• intentions to improve that performance •
 Legitimacy Theory
• Seek to change the organisation’s perceptions of
the event (but
• without changing the organisation’s actual
performance
• • Distract (i.e. manipulate) attention away from
the issue of
• concern
• • Seek to change external expectations about its
performance.
 REFERENCES/FURTHER READINGS

• Manuel, G. Velasquez. Business Ethics, Concepts and Cases.

• George, S. (2006). Business Ethics Guidelines and Resources. May

• International Company.

• Oelgeschlager, Gunn & Hain (1981). “Ethics and Management of

• Computer Technology”. Proceedings of the Fourth National

• Conference on Business Ethics 1981: Bentley College)

• Cambridge, MA.

• Jeffrey, L. Seglin, (2003). , The Right Thing: Conscience, Profit and

• Personal Responsibility in Today’s Business. Spiro Press.
 Business ethics

•The end of
module one