ETHICS AND BUSINESS

“Good people do not need laws to tell them to act justly, while bad people will find a
way around laws.” - Plato

For plato, man is naturally good.

INTRODUCTION
- business is part of human society (there is interaction between and among
individuals, institutions and human persons)
Activities: viewed and examined from the perspective or morality (why?)
- because business without ethics threatens the survival of human society and
destroys the fiduciary relationship of people (the trust between and among people)

Study of business ethics paves the way for common understanding of the
fundamental concepts of what is right and wrong in human conducts and its
implications to business as an important human activity.

THE NATURE OF BUSINESS

- business is as old as human civilization
- other people sought products and services they need
- people have needs and wants and those who have capital will contribute to
produce and sell goods and services that will satisfy the needs and wants of
customers.
- business is an activity that is part of human society
- it is a lawful activity engaged into by human beings
- as a part of society, it must be examined from the ethical perspective

Barter system - first type of market

Fundamental Reasons
1. Promotion of the common good
2. Protection of the individual's interest
3. Preservation of the human society

Business - it is a complex enterprise that involves major activities

THE IMPORTANCE OF ETHICS IN BUSINESS

1. Business Ethics paves the way for a common understanding of the fundamental
idea of what is good and what is bad in our human conduct.
2. Without ethics, people will set either own moral standards, which would result
into a kind of subjective morality. (good for you but for others not and vice versa)
3. Provides a common understanding of the universal, objective and irreversible
moral principles that should govern human behavior and guide moral decisions.
(ethics doesn't only evaluate human conduct of business people but will provide us
common understanding of the universal, objective and irreversible principles)
4. Opens a novel way of resolving moral problems and ethical dilemmas affecting
business transactions and the interactions of people in the corporate world.
5. Enhances the human and interpersonal skills of managers. (through the use of
ethical standards)

Businessman's Myths about Business Ethics (De George)

- businessman are not immoral (man by nature is good). Hence it is disastrous to
conclude that businessman are immoral.
- wrong perception of businessmen about the role of ethics in the conduct of
business affect their moral judgement and moral decision making
- business is certainly a good and productive human activity because business arises
from the goodness of human person to satisfy other people's want and needs.

Myth 1: Ethics is a personal affair and not a public debatable matter.

- businessman claim that ethics is a private issue (subjective)
- our belief is affected by our religion, culture and family values - has great impact
in molding an ethical person
- man is a social being
- ethics is a subjective matter (myophic view of our human nature - “ako lang”)
- you are secluding yourself, confining yourself from the society.

CONCLUSION: ETHICS IS A PUBLIC MATTER

Myth 2: Ethics and business do not mix.

- some claim that ethics doesn't have a role in business (business is business, ethics is
ethics)
- most likely grounded on the view that business is an autonomous activity (as a
businessman, I can do whatever I want)
- business is an activity independent of ethics (short-sighted view of ethics and
business)
- BUSINESS MUST BE VIEWED IN THE PERSPECTIVE OF ETHICS (part and parcel of
society)

CONCLUSION: ETHICS HAS AN IMPORTANT PLACE IN BUSINESS WORLD

Myth 3: Ethics in business is relative.

- morality is relative (NO because there is a universal, objective and irreversible
moral truth that all people believe)
- all people around the world believe that there must be concept present in the
business world that must be used in business activity

Myth 4: Good business mean good ethics.

- a profitable business doesn't mean it is ethical (eg. drug trafficking)
- ethics allow businessman look closely into the end and means of doing business
(the end doesn't justify the means)
- profit maximization is a good end but means of getting high profit must be
examined and be viewed in the perspective of ethics.
Myth 5: Business is a war.
- market is not an arena of gladiators trying to fight for survival often result now in
using predatory tactics to destroy their competitors to merge as the market leader.
- tactic - false advertisement (immoral)
- business must promote a healthy competition

Roles of Ethics in the Business World

1. Ethical management in the business.
- how they manage the operation of the business, how they deal with their
employees
2. Ethical management regarding intellectual property rights.
3. Ethical management in sales, advertising and marketing.
- false advertising, false branding
4. Ethical management in production.
- with regard to the quality of good/ quality of resources used
5. Ethical management in finance, accounting and auditing.

THE RELATIONSHIP BETWEEN ETHICS AND BUSINESS

* without ethics, business will be a chaotic activity
1. Actions of individuals and institutions in business must be subjected to moral
rules and moral evaluation
2. An action may be legal but not necessarily moral. Ethics provides a clear
distinction between morality and legality.
- not all legal are moral, not all legal are ethical
- ethic proved a clear distinction between morality and legality
- laws sometimes have flaws
3. Laws are insufficient. Ethics is the unwritten law that will help in discernment.
- ethics are unwritten law that helps man in discerning, ethics are written in the
hearts of man
- ethics will help business man to follow proper conduct (conscience and reason)
4. Managers must balance profit maximization with complex situations, bearing
ethical consequences.
- trend - train business people to maximize profit (by quantifying the operations
of business - aided by quantitative instruments - ex. forecasting)
5. Peter Drucker reminds us that a business corporation is not just created to make
profits but should also consider its moral and social obligations to its stakeholders.
- business should not only look after its interest but also the interests of their
stakeholders (employees, clients, society)
- CSR’s

MORAL REASONING IN BUSINESS

- Moral reasoning is a process on which ethical issues and problems are
benchmarked against a moral standard so that a moral judgement (grounded on a
set of standards) is made possible.
FRAMEWORK OF MORAL REASONING
1. Ethical Issues -> REALITY CHECK -> Moral Norm, Moral Standard, Company Policy,
Ethical Principle -> Moral Judgement
2. SITUATION ANALYSIS -> PROBLEM ANALYSIS -> DECISION ANALYSIS ->
RESOLUTION
3. Examples: Graft, Sexual Harassment, Theft, Bribery -> Gravity of Offense,
Frequency of Offense, Harm done, Number of people affected, Cost -> Company
rules/policies, Ethical Principles, Codes of Conduct, Moral norms -> Moral or Immoral,
Legal or Illegal

CHARACTER OF A GOOD MORAL STANDARD (SHAW)

1. A good moral standard is one that looks at the issue as something that is very
serious, e.murder, graft and corruption, stealing.
2. A good standard must be grounded on good moral argument.
3. A good standard should be objective and not subjective.
4. A good standard, when violated, brings about feelings of guilt, shame, and
remorse of conscience.

REQUIREMENTS FOR A GOOD MORAL JUDGEMENT

1. A good moral judgement must be logical.
- a decision maker must arrive in an informed decision of an issue
2. A good moral judgement must be based on facts and solid evidence.
- information used must not come from weak sources (not heresy), it must be
well-founded and well-grounded
3. A good moral judgement must be based on sound and defensible moral principles.

THE MORALITY OF A PROFIT-MOTIVE PEOPLE

People go into business for a number of reasons.

“the only responsibility of business is to profit so long as one stays within the rules of
the game engages in an open and free competition” - Milton Friedman
“the primary responsibility of business is to look for customers and satisfy their
needs and wants.” - Peter Drucker

THE ASSUMPTIONS OF PROFIT MOTIVE

- Profit motive in business is an ethical issue. In business, the concept of what is
reasonable profit is subject of endless debates.
- Profit motive as an ethical issue operates within the two important aspects of our
human conduct-freedom (right to decide how much profit) and the struggle of
business (includes tenets on profit making)

THE GOOD AND THE BAD SIDES OF PROFIT-MOTIVE (Fr. Morga, SJ)
A.The Good Side of Profit-Motive
- profit-motive motivates people to do something meaningful
- profit-motive promotes ingenuity and cleverness in running a business
- profit-motive makes people productive
- profit also results in more jobs and more goods and services for the public
B. The Bad Side of Profit-Motive
- profit-motive promotes rivalry among competitors resulting into a “dog-eat-dog”
world
- profit-motive makes people focus only on making money without consideration on
the safety of products
- profit-motive turns the businessman into a materialistic person
- profit-motive, to some extent, promotes self-interest rather than the common
good

ETHICAL CONSIDERATIONS OF PROFIT-MOTIVE IN BUSINESS

- earning a profit is a good and valid activity in business, however, an ethical
discernment is required: is my profit fair enough for me and my customers?
- making excessive profits is totally wrong
- profit is not the “be-all and the end-all” of doing business
- Pope Pius XI reminds that “one should respect the laws of God, not prejudice the
rights of others, and work according to fight and right reason.” (QA #136)

THE CONCEPT OF MORAL RESPONSIBILITY

- story of creation
- man is by nature a being and a creature who is responsible and accountable for his
actions
 man is rational being
 man is free being

THE CONCEPT OF MORAL RESPONSIBILITY (Shaw)

1. Moral responsibility refers to holding people morally accountable for some past
action or actions.
2. Moral responsibility also means care, welfare, or treatment of others as derived
from the specific social role that one plays in the society.
3. Moral responsibility, likewise, refers to one's capacity for making moral or rational
decisions on his own.

BUSINESS ETHICS DEFINED

- business ethics is the study of what is right and wrong human behavior and conduct
in business
- business ethics is a study or perceptions about morality, moral norms, and ethical
principles as they apply to people and institutions in business
- business ethics is the evaluation and ethical standards that managers and decision
makers use in resolving moral issues and ethical dilemmas affecting business