Chapter 1: Ethics and Business

There are two educations. One should teach us how to make a living and how to
live.- John T. Adams
Introduction:
Business
-

Part of human society

Part of the complex web of interaction among institutions and people, its
activities must be viewed and examined from the perspective of MORALITY
Without Ethics, it threatens the survival of human society and in some cases,
destroys the fiduciary relationships of people.

The study of Business Ethics paves the way for our common understanding of
the fundamental concepts of what is right and wrong in our human conduct
and its implications to business as an important human activity.
1. NATURE OF BUSINESS
Business as old as human civilization
As long as people have needs and wants, there will be always be business.
Business is an activity that is part and parcel of human society. Society will not exist
without business.
Business = integral part of society; its activities must be examined from the ethical
perspective.
Why examine?
1. For the promotion of common good
2. Protection of the individuals interests
3. Preservation of the human society in general
// Without ethics, business will be chaotic = THERE WILL BE NO COMMON
UNDERSTANDING AND AGREEMENT ABOUT WHAT IS RIGHT AND WRONG HUMAN
CONDUCT.
Business deals with many activities; Businessmen deals with suppliers, customers,
workers, employees, and even employees. >>>> Ironically, it is within this
structure of interaction of people that a lot of questionable practices occur
misrepresentation, questionable pricing policies, false advertising, misbranding,
lying, adulteration, unfair competition, local price-cutting
>>> so:
1. Ppls rights are violated
2. Values are disrespected
3. Interest of common good is disregarded.
CLA

Business is a GOOD human activity! Selfish motive and personal interests of

unscrupulous businessmen kapag BAD na.

2. IMPORTANCE OF ETHICS IN BUSINESS

Business Ethics paves the way for a common ground in our understanding of the
fundamental idea of what is good and what is bad for our human conduct.
If walang Ethics, ppl (businessmen) will set their own moral standards, moral rules,
moral principles. (SUBJECTIVE MORALITY) what is good for one may be bad for
the other
SUBJECTIVE ETHICAL PARADIGM

Ethics as a science does not only evaluate the morality of our human conduct but
also provides us with common understanding of universal, objective and irreversible
moral principles that should govern our human behavior and guide our moral
decisions.
Quantitative approach is not applicable when managers talk about moral issues and
ethical problems of people. BY PHILOSOPHICAL ANALYSIS AND MORAL
REASONING dapat!!
Business Ethics opens a novel way of resolving moral probs and ethical dillemas
affecting business transactions and the interactions of people in the corporate
world.
The study of Business Ethics will enhance the human and interpersonal skills of
managers so that they can be more effective in managing the human side of
organization.

3. THE BUSINESSMANS MYTHS ABOUT BUSINESS ETHICS

Businessmen arent immoral.
Business is good and productive human activity; however, businessmens wrong
perception about the role of ethics plays in the world of business that affects his
moral judgment and decision making.

1982 DE GEORGEs myths sa B.E.:

Myth #1: ETHICS IS A PERSONAL AFFAIR AND NOT A PUBLIC DEBATABLE
MATTER
Private issue raw ang ethics >>
In one sense, this is true because ones concept of morality is a result of
environmental factors (a great impact on the devt of human person); On the other
hand, man is also a social being >> he is a being in relation with other men.
If Ethics is subjective, morality then is personal and relative. Ppl will make their
own moral laws
People are entitled to their own values. Worse if inimpose nya sa others. They
must consider the values and religious orientations of others.
Out personal rights are limited by the rights of others.
Individuals moral value may be very subjective but in the exercise of this value
system he must also consider the impact and gravity of his actions on others;
thus,
ETHICS IS A NOT PERSONAL AFFAIR BUT A PUBLIC DEBATABLE MATTER
Myth #2: ETHICS AND BUSINESS DO NOT MIX.
Based on the assumption that business is an autonomous human activity where
ethical standards do not exist and businessmen are free to do what they want.
Since business is part of society, it must be examined on the perspective of ethics.

ETHICS HAS AN IMPORTANT PLACE IN BUSINESS.

Myth #3: ETHICS IN BUSINESS IS RELATIVE.
Morality raw depends on himself and his environment. (mali rin)
Businessmen claim that morality is relative = the fundamental concepts of right
and wrong depend on cultural and religious values of ppl. (may be good for one
country but bad on the other. Ex: abortion)
There are universal moral principles that people share and agree upon
regardless of rel orientations, cultural expresions and value system.
BUSINESS ETHICS PAVES THE WAY FOR A COMMON GROUND IN OUR
UNDERSTANDING OF THE FUNDAMENTAL IDEA OF WHAT IS GOOD AND WHAT IS
BAD FOR OUR HUMAN CONDUCT.
Myth #4: GOOD BUSINESS MEANS GOOD ETHICS.

The study of business ethics encourages managers and businessmen to look

closely into the end and the means of doing business.

THE END DOES NOT JUSTIFY THE MEANS.

Myth #5: BUSINESS IS WAR
Businessmen often resort to predatory tactics to destroy competitors in order to
emerge as market leader.
Business is a good human activity and an integral part of society
IT MUST PROMOTE HEALTHY COMPETITION AND NOT DESTROY COMPETITORS.

4. THE RELATIONSHIP BETWEEN ETHICS AND BUSINESS

Without morality, business will be a chaotic human activity.
Ethics is NOT a study of positive laws intended to govern and regulate the
actions of people doing business.
Ethics is a Philosophical Science concerned that there are unwritten laws
written in our hearts that should govern our human conduct where positive
laws are absent or not very clear.
ARGUMENTS JUSTIFYING THE SIGNIFICANT ROLE THAT ETHICS PLAY IN THE
WORLD OF BUSINESS:
I.

II.

III.

IV.
V.

Business is an integral part of human society. Therefore, the actions of

individuals and institutions in business must be subject to moral rule and
moral evaluation.
In business, as any other human endeavor, what is legal may not
necessarily be moral.Ppl tend to confuse legality with morality. An action
may be legal but not necessarily moral. Ethics provides us clearer
distinction between legality and morality.
Laws are insufficient. They cannot cover all aspects of our human behavior.
Laws are sometimes absent/not clear in some areas of our human conduct.
Ethics is unwritten law written in the hearts of men. Ethics helps us discern
the correct conduct to follow based on the dictates of our conscience and
reason.
Managers and business leaders must be prepared to respond to complex
situations bearing ethical consequences.
Peter F. Ducker argues: the business enterprise is an organ of society and
its actions have decisive impact on social scene. This reminds us that
business isnt created to make profits but also to consider moral and social
obligations to stakeholders. Business orgs should not just look after their
own interest but also to the interest of common good.

5. MORAL REASONING IN BUSINESS

Essence of studying business ethics: to provide manager (as decision maker) a
Framework for resolution of moral issues affecting business activities and
organization itself.
MORAL REASONING: is a process in which ethical issues and problems are
benchmarked against a moral standard so that a moral judgment is made possible.
Responsibility ng managers ang helping to resolve (if not prevent) moral issues that
may have adverse effects on the operations of the business!

1999 Shaws Characteristics of a GOOD MORAL STANDARD:

i.
ii.

Looks at the issue as something that is very serious

Grounded on good moral argument(tells the truth) = solid moral argument(no
loopholes)
Objective; universally accepted and applies to all
If violated, it brings about feelings of:
a. Guilt
b. Shame
c. Remorse of conscience

iii.
iv.

Requirements for a GOOD MORAL JUDGMENT:

i.
ii.
iii.

Logical
Based on facts and solid evidence
Based on sound and defensible moral principles (if weak ethical principle=
open to many criticisms)
6.

MORALITY OF PROFIT-MOTIVE

Dominant reason why we enter business: make a profit

Milton Friedman an economist only responsibility of business is to make profit

so long as it stays within the rules of the game and engages in open and free
competition without deception or fraud."
Peter F. Ducker a mgmt. guru the primary responsibility of business is to look
for customers and satisfy their needs and wants

The Assumptions of Profit-Motive:

1. Profit motive in business is an ethical issue. Profit-making must be examined
from the perspective of morality.
2. Profit motive as an ethical issue operates within 2 impt aspects of our human
conduct:
a. Freedom right to decide on amt of profit
b. Structure of business tacit guideline that governs business activities
like profit making

The GOOD and BAD sides of profit motive: (2 sides)

2004 Fr. Moga, S. J.

GOOD SIDE
1. Motivates to do something
meaningful
goal to pursue and something to
live for
2. Promotes ingenuity and
cleverness in running business
- overcome obstacles to have
success
3. makes people productive
- because of desire for money
4. generates potential capital for
the business
- profit is potential capital

BAD SIDE
Promotes rivalry
- Dog-eat-dog
Focus on making money
- no consideration on needs and
wants
Turns businessman from reflective to
questioning person
- focuses on making money
Promotes self-interest rather than
common good
- have social cost (nega eff on
environmt)

ETHICAL CONSIDERATIONS OF PROFIT-MOTIVEIN BUSINESS:

a) Ethical discernment is required for businessmen: Is my profit fair enough for
me and my customers? Did I consider important factors and parameters?
b) Excessive profits are wrong; greed, avarice, manipulation of customers
c) Profit is not be-all and end-all of doing business

d) Pope Pius XIs Quadragesimo Anno does not totally condemn profit as
part of business activity
7. THE CONCEPT OF MORAL RESPONSIBILITY
Adam and Eve; Tree of Knowledge
Avoiding responsibility and accountability of bad actions

Man by nature is a being and a creature who is supposed to be responsible and

accountable for his actions. 2-fold reason:
1. Man is a rational being (capable of moral judgment)
2. Man is a free being (Capable of choosing)
1999 WILLIAM H. SHAWs meanings of Moral Responsibility:
Holding to people morally accountable for some past action or actions
Care, welfare, and treatment of others as derived from specific social role
that one plays in society (duty depending on role; ex: as parents, teachers)
Ones capacity for making moral & rational decisions on his own

8. BUSINESS ETHICS DEFINED

1. study of what is right or what is wrong human behavior and conduct in business
2. study of perceptions of people abt morality, moral norms, moral rules, and ethical
principles as they apply to institutions or business
3. study, evaluation, analysis, and questioning of ethical standards, policies, moral
norms, and ethical theories that managers and decision makers use in resolving
moral issues and ethical dilemmas affecting business.