May 14, 2019

Business Ethics – Introduction

Business ethics is applied ethics. It is the application of our understanding of what good and right to that assortment of institutions, technologies, transactions, activities, and pursuits which we call "business"

First we need to understand what is meant by the terms "good" and "right" to discuss the implications of these for the business world.

A dictionary meaning of ethics is "the study of morality." Just as chemistry refers to a study of the properties of chemicals, ethics studies morality. It is not quiet the same as morality. Ethics is investigation of scientific study and the results of that investigation. Morality is the subject of investigation. 

What is morality?


Morality can be defined as the standards that an individual or a group has about what is right and wrong or good and evil.

How to distinguish moral standards from standards that are not moral?

Ethicists suggested five characteristics to identify moral standards.

1. Moral standards deal with matters which people think can seriously injure or seriously benefit human beings.
2. Moral standards are not established or changed by political or legal authoritative bodies. The validity of moral standards rests on the adequacy of the reasons.
3. Moral standards are preferred to other standards including even self-interest when choice is there.
4. Moral standards are impartial. They are based on impartial reasons that an impartial observer would accept.
5. Moral standards are associated with special emotions. When people act in violation of a moral standard, they feel guilty, ashamed and remorseful.

(More detailed essay: The Definition of Morality )


Ethics is the activity of examining the moral standards of a society or of an individual. Whether the standards are reasonable or not and how to apply the standard in particular situations are examined by ethicists. The aim of ethics is develop a body of moral standards that a person feels reasonable to hold based on careful thought.

Business Ethics

Business ethics is an enquiry of ethics in the field of business. It concentrates on moral standards that the system of business, business organizations, and individuals with in the business organizations and individuals who deal with business organizations have to evaluate and follow in their day to day dealings and decisions.

Business ethics can be studied at three levels: systemic, corporate and individual. Systemic issues deal with economic, political, legal and other related systems within which production and distribution activities are carried out. Questions related to the morality of capitalism, regulation of business etc. fall into this level. Corporate level issues deal with actions of corporate concerns or corporate citizens.

Individual levels issues deal with every individual working in a business firm and it can include customers/consumers.

Do Moral Standards Apply to Corporations?

While some people do argue that corporations have no moral standards to adhere to and only people have. Velasquez concludes that as corporate citizens they have moral standards to live up to but at the same time they are mainly acted upon by people. People are behind corporate decisions.

Moral Development

Some people believe that a person's values are formed during childhood and then do not change.But psychological research reveals that as persons mature, they change values in very deep and profound ways.

Lawrence Kohlberg proposed that a person’s ability to deal with moral issues develops in six identifiable stages.

Level 1.  Preconventional stages

As a child

Stage 1: For child, the physical consequences determine the goodness or badness of an act. It means, he will not things for which his parents impose physical punishment. They are bad things.

Stage 2: Right activities are those that satisfy the needs of the child or the needs of persons he cares about.

Level 2. Conventional stages

As adolescent

Stage 3: Good behavior is living up to the expectations of the group of people one loves or trusts such as family or friends.

Stage 4: At more mature stage law is followed for determining right or wrong acts.

Level 3. Postconventional, autonomous, or principles stages

Stage 5: Conflicting personal views are recognized.
Stage 6: Moral principles are chosen because of their logical comprehensiveness in ethics enquiry.

Carol Gilligan, a psychologist who worked under Kohlberg, became of a critic of his theory.  She argued that Kohlberg observed only males and developed the theory.  When females are observed, we realize that they they tend to see themselves as part of a "web" of relationships with family and when they encounter moral issues they are concerned with sustaining these relationships. In this role, morality is primarily a matter of "caring" and "being responsible" for others with whom one is involved in personal relationships, and not a matter of adhering to impartial and impersonal rules.

Subsequent research, agrees that moral issues can be dealt with from a perspective of impersonal partiality, or from a perspective of caring for persons, and these two perspectives are distinct.

From more on Gilligan's theory

Moral Reasoning

Moral reasoning is the process by which actions are judged with reference to moral standards. It involves knowledge of moral standard and whether a situation has arisen wherein moral standard needs to be applied.

Moral reasoning has to be logical. The factual evidence regarding the situation must be accurate, relevant and complete. The set of moral standards invoked has to be consistent.

(For more detailed essay see: Moral Reasoning

Arguments For and Against Business Ethics

Arguments against Business Ethics

1. The pursuit of profit will by itself ensure social responsible behavior in perfectly competitive markets.
2. Managers are loyal agents and they should pursue the interests of their firms and should ignore ethical considerations.
3. It is sufficient if business firms obey law.

Arguments for Expecting Ethical Behavior from Business Concerns

1. Businesses cannot survive unless moral standards exist in business concerns and outside.
2. Ethical concerns are consistent with profits of businesses.
3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.
4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.

Main source:

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

Fourth Edition,  Prentice Hall Inc., Upper Saddle River, N.J., 1998,

Business Ethics by Manuel G. Velasquez - Book Information and Review


Business Ethics: The new bottom line

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Moral Standards and Moral Judgments – Approaches

Updated 15 May 2019,  7 Sep 2015
First published in blog 20 Dec 2011

Originally posted in 2utb2lsm2k7a/ 1373#


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