Business EthicsSeventh Edition

Richard T. DeGeorge

Chapter 1Ethics and Business

© 2011 Pearson Education. All Rights Reserved.

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Chapter TopicsA.   Chapter OverviewB. What is Business Ethics?C. Horatio Alger and Stock OptionsD.   The Myth of Amoral BusinessE.   The Relation of Business and MoralityF.   Business Ethics and EthicsG.   The Case of the Collapsed Mine

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A. CHAPTER OVERVIEW• Business is an important part of contemporary

society & it involves all of us, one way or another. • Business is not something separate from society

or imposed on it, it’s an integral part of society. • Morality consists of rules of human behavior &

specifies that certain actions are wrong or immoral & that others are right or moral.

• Since business activity is human activity, it can be evaluated from a moral point of view, just as any other human activity can be so evaluated.

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B. WHAT IS BUSINESS ETHICS?• The term business ethics is used in several

different senses– (1) ethics in business– (2) business ethics as a movement– (3) business ethics as part of the general field of ethics.

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What’s the Aim of Business Ethics?• It is neither defense of the status quo nor its

radical change. • Rather, it should serve to remedy those

aspects or structures that need to change, and it should protect those that are moral.

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C. HORATIO ALGER• Horatio Alger (1832-1899) wrote a series of

“rags to riches” stories, involving success through the “energetic and dedicated work of the hero.”

• “Luck and Pluck” – The belief that those who worked hard could make

it. – Hard work and a little luck were all that needed.

• The belief received a new impetus in the high-tech industry. Microsoft is the best-known example.– Pay was noncompetitive & long hours were

expected but stock options made early employees millionaires.

– As the industry matured, later employees unfairly did not do as well.6

MYTH OF AMORAL BUSINESS• Expresses the ambivalence of many toward

business and a popular, widespread view of Business. The myth has several variations:– Business is amoral insofar as ethical considerations are

inappropriate to business• Because business is business. • Ethical language is simply not the language of business.

– Many businesses act unethically not because of a desire to do evil,

• But simply because they want to make a profit & • Therefore disregard some of the consequences

of their actions.

D.

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The Breakdown of the Myth of Amoral Business

1. By the reporting of scandals and the concomitant public reaction to these reports;

2. By the formation of popular groups such as the environmentalists and the consumerists;

3. By the concern of business in ethics, - as expressed in conferences, - magazine and newspaper articles, - & the burgeoning of corp. codes of

ethical conduct & of ethics programs.- It’s better than admitting you’re stupid.

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E. THE RELATION OF BUSINESS TO MORALITY

• The business of business• The moral background of business• The changing mandate for business

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The Business of Business• What is considered to be business & its business

varies from society to society. • Defining business per se & its proper

concern is a social question that must be answered in a social context.

• The limits & demands imposed on business by society are frequently moral ones.

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The Moral Background of Business• Morality consists of rules of human behavior &

specifies that certain actions are wrong or immoral and that others are right or moral.

• Since most businesses value their reputations, we don’t really live in a “dog-eat-dog” business world. – Because the ordinary person does not need to be told

that lying & stealing are wrong that they form part of the background of business.

• The limits set by society on business are often moral, but they’re also often written into law.

• The retreat to law as the norm to guide business is reflects that most managers do not know how to handle many moral issues in business.

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The Changing Mandate for Business• The social mandate to business is not only

given in law.• Today the mandate to business is more complex.• Corporations are asked to consider the impact of

their decisions and actions on the environment, the public, and the common good.

• Business must consider what structures promote moral responsibility and facilitate the weighing of moral and other values.

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F. BUSINESS ETHICS & ETHICS • The term business ethics is used in three

different senses: – ethics in business– business ethics as a movement– business ethics as part of the general field of ethics.

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Ethics Studies Morality• Morality is a term to cover practices & activities:

– that are considered importantly right & wrong; – the rules that govern those activities; and – the values that are embedded, fostered, or pursued by

those activities & practices.

• Ethics is a systematic attempt to make sense of our individual and social moral experience, in such a way as to determine the rules that ought to:– govern human conduct, – the values worth pursuing, and – the character traits deserving development in life.

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General Ethics• Descriptive ethics is closely related to

anthropology, sociology, and psychology• Normative ethics builds on the whole that

descriptive ethics provides and attempts to supply and justify a coherent moral system based on it

• Metaethics is the study of normative ethics, and, to some extent, both normative and descriptive ethics involve some metaethical activity

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Special Ethics• Causitry is the art of solving difficult moral

problems, cases, or dilemmas through careful application of moral principles.

• Applying general ethics to specialized fields yields business ethics, medical ethics, engineering ethics, professional ethics, etc.

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Business & Business Ethics Defined• “Business” includes any and all economic

transactions – between individuals, – between individuals & profit-making organizations,– between profit-making organizations and other such

organizations.• Business ethics as a field is defined by the

interaction of ethics & business

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Business Ethics Involves 5 Activities1. The application of general ethics principles to

particular cases or practices in business.2. Metaethics: whether moral terms generally used to

describe individuals & actions can also be applied to organizations, businesses & collective entities.

3. Analysis of business presuppositions - both moral presuppositions & those from a moral point of view.

4. Study of embedded problems that go beyond the field of ethics & into other areas of philosophy & into other knowledge domains, like econ. & org. theory.

5. Describing morally praiseworthy & exemplary acts of either individuals in business or particular firms.

G. CASE OF THE COLLAPSED MINE• Though this case is fictitious, the reality of collapsed

mines in the coal industry is a real dilemma. – Miners were digging coal 1000s of metres below ground. – An explosion traps 8 miners in a pocket. – The cost of reaching the men in time to save their lives

would amount to several million dollars. – The problem facing the manager was whether the

expenditure of such a large sum was worth it. • What, after all, was a human life worth? • Who should make the decision, and how should it be made? • Did the manager owe more to the stockholders of the corporation

or to the trapped workers? – Should he use the slower, safer, cheaper way of reaching

them & save money, or the faster, more dangerous, more expensive way, & maybe save lives?

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