1. BUSINESS ETHICS
Lecture 2
AP. Azmi Ariffin MBA, CA (M), IIA
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. CHAPTER OBJECTIVES
After learning this chapter, you will be able to:
2. Describe Normative thoeries of ethics
o Egoism, Utilitarianism & kan’t Ethics
o Other Non consequentialist perspectives
2. Describe a process for ethically responsible decision-making.
3. Apply this model to ethical decision points.
4. Explain the reasons why “good” people might engage in
unethical behavior.
5. Explore the impact of managerial roles on the nature of our
decision-making.
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3. Normative theories of ethics
o Normative Theories- principles(s) which distinguished right
actions from wrong.
o Normative theories are divided into 2 kinds:
o Consequentialist
o Determine what is right by weighing the ratio of good to
bad that an action will produce.
o If its consequences are good, then the act is right; if they
are bad, the act is wrong.
o 2 most important theories:
o Egoism – advocates individual self-interest
o Utilitarianism – one must take into account everyone
affected by the action
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4. Nonconsequentialist (deontological)
theories
o Right & wrong are determined by more than the
likely consequences of an action.
o See other factors are also relevant to the moral
assessment of an action.
o Below are the critical inquiries of
Nonconsequentialist:
o How well justified are the Nonconsequentialist
principles and moral rights?
o Can the nonconsequentialist satisfactorily handle
conflicting rights and principles?
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5. Egoism
o is a view where it equates morality with self-interest
(always look out for number one).
o It focuses on the happiness of individuals.
o 2 kinds of egoism:
o Personal egoists – pursue their own best interest
but do not say what others should do.
o Impersonal egoists – everyone should let self-
interest guide his/her conduct.
o Psychological egoism – people are, as matter of fact,
so constructed that they must behave selfishly.
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6. Problems with egoism:
o Psychological egoism is not a sound theory –
sometimes people are acting for reasons that are not
self-interested (a sense of obligation / to promote
others happiness)
o Ethical egoism is not really a moral theory at all –
misunderstands the nature & point of morality.
o Ethical egoism ignores blatant wrongs – by reducing
everything to the standard of best long-term self-
interest, egoism takes no stand against such
seemingly immoral acts as theft, murder, racial &
sexual discrimination.
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7. Utilitarianism
o Is the moral doctrine that we should always act to
produce the greatest possible balance of good over
bad for everyone affected by our actions.
o The interest of the community are simply the sum
of the interests of its members.
o 6 points about Utilitarianism:
o Unhappiness vs happiness – when deciding which
action will produce the greatest happiness, we
must consider unhappiness/ pain as well as
happiness.
o Action affect people to different degree
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8. 6 points about Utilitarianism: (Cont’d)
o Any action can be morally right – utilitarian’s
evaluate actions according to their consequences &
actions produce different results in different
circumstances, almost anything might, in principle,
be morally right in some particular situation.
o Maximize happiness in the short and long run
o Do not know for certain what future consequences
of our action
o When choosing among possible actions,
utilitarianism does not require us to disregard our
own pleasure
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9. Utilitarianism at Organizational Level
o Utilitarianism provides a clear &
straightforward basis for formulating & testing
policy.
o Provides an objective & attractive way of
resolving conflicts of self-interest.
o Provides a flexible, result-oriented approach to
moral decision making.
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10. Critical inquiries of Utilitarianism:
o Is utilitarianism really workable? – in difficult cases,
we may be very uncertain about the likely results of
the alternative courses of action open to us.
o Are some actions wrong, even if they produce good?
– Utilitarianism focuses on the results of an action,
not on the character of the action itself.
o Is utilitarianism unjust? – Utilitarianism concerns
itself with the sum total of happiness produced, not
with how that happiness is distributed. Utilitarianism
may even require that some people’s happiness be
sacrificed in order to achieve the greatest amount of
happiness.
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11. German ethical thinker Immanuel Kent
o Kant’s Ethics tells that we should carry out moral
actions because it is our duty to do so and not
because we want or are inclined to, or because the
benefits outweigh the costs.
o The categorical imperative
o An absolute moral truth must be logically
consistent, free from internal contradiction –
everyone would be obliged to follow it without
exception.
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12. Kant (Cont’d)
o We should always act in such a way that we can
will the maxim of our action to become a universal
law.
o By maxim, Kant meant the subjective principle of
an action, the principle (or rule) that people in
effect formulate in determining their conduct.
o Moral rules prescribe categorically, not hypothetically
– a hypothetical prescription tells us what to do if we
desire a particular outcome (if I want people to like
me, I should be nice to them).
o A categorical imperative takes the form of “Do this”
or “Don’t do that” – no if, and or but.
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13. Kant in an organizational context
o Categorical gives us firm rules to follow in moral
decision making, rules that do not depend on
circumstances / results & that do not permit
individual exceptions.
o Kant introduces an important humanistic dimension
into business decisions.
o Kant stresses the importance of motivation & of
acting on principle. According to Kant, it is not
enough just to do the right thing, an action has moral
worth only if it is done from a sense of duty (from a
desire to do the right thing for its own sake)
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14. Below are the critical inquiries about
Kant’s Ethic:
o What has moral worth? – If the action is motivated by
self-interest (to get reputation for honesty), then it
does not have moral worth.
o Is the categorical imperative an adequate test of right?
– suppose that we decide that stealing is sometimes
right, perhaps in the case of a person who is starving.
o What does it mean to treat people as means?
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15. Kant’s Ethic (Cont’d)
o Prima facie obligations
o Is an obligation that can be overridden by a more important
obligation.
o Moral Decision Making: Toward a Synthesis
o In any moral discussion, make sure participants agree about
the relevant facts.
o Once there is general agreement on factual matters, try to spell
out the moral principles to which different people are, at least
implicitly, appealing.
o We cannot sincerely endorse a principle if we are not willing
to see it applied generally.
o Looking at an issue from the other person’s point of view.
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16. OPENING DECISION POINT:
WHAT WOULD YOU DO?
o You find the iPod . . . .
o What would you think about as you sat there trying
to decide what to do?
o What are the key facts that you should consider
before making a decision, as either the person who
discovered the iPod, the friend, or the judicial
board member?
o Is this an ethical issue? What exactly are the
ethical aspects involved in your decision?
o Who else is involved, or should be involved, in
this decision? Who has a stake in the outcome?
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17. OPENING DECISION POINT:
WHAT WOULD YOU DO?
o What alternatives are available to you? What are
the consequences of each alternative?
o How would each of your alternatives affect the
other people you have identified as having a stake
in the outcome?
o Where might you look for additional guidance to
assist you in resolving this particular dilemma?
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18. AN ETHICAL DECISION-MAKING
PROCESS:
CLICK TO EXPLORE EACH ELEMENT
o Determine the facts
o Identify the ethical issues involved
o Identify stakeholders and consider the situation from their point of view
o Consider the available alternatives – also called “moral imagination”
o Consider how a decision affects stakeholders, comparing and weighing the
alternatives, based on:
o Consequences
o Duties, rights, principles
o Implications for personal integrity and character
o Make a decision
o Monitor and learn from the outcomes
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19. DETERMINE THE FACTS
o It is essential to make an honest effort to understand
the situation, to distinguish facts from mere opinion
o Knowing the facts and carefully reviewing the
circumstances helps in resolving disagreements at an
early stage.
o Social sciences can help in determining the facts
surrounding our decisions.
o How would this apply to the Opening Decision Point
(the I-Pod)?
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20. IDENTIFY THE ETHICAL ISSUES
INVOLVED
o It requires the ability to recognize a decision or issue
as an ethical decision or ethical issue.
o In certain situations, issue identification becomes the
first step and determining the facts becomes the
second step.
o In many business situations, what appears to be an
ethical issue for one person will be perceived as a
simple financial decision by others.
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21. IDENTIFY THE ETHICAL ISSUES
INVOLVED
o How does one determine that a question raises an ethical issue
at all? When does a business decision become an ethical
decision?
o We need to recognize that business or economic decisions
and ethical decisions are not mutually exclusive.
o Being sensitive to ethical issues is an important
characteristic that needs to be cultivated in ethically
responsible people.
o We need to ask how our decisions will impact the well-
being of the people involved.
o To the degree that a decision affects the well-being of the
people involved, it is a decision with ethical implications.
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22. IDENTIFY THE ETHICAL ISSUES
INVOLVED
o Normative myopia: Shortsightedness about values.
o It is the inability to recognize ethical issues.
o In business contexts, it can be easy to become so
involved in the financial aspects of decisions that one
loses sight of the ethical aspects.
o Normative myopia does not occur in business alone.
o Inattentional blindness: Results from focusing
failures.
o Change blindness: Means by which ethical issues
might go unnoticed.
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23. IDENTIFYING STAKEHOLDERS
o Stakeholders: All of the groups and/or individuals
affected by a decision, policy or operation of a firm or
individual.
o Making more reasonable and responsible decisions:
o Consider issues from a variety of perspectives
other than one’s own and other than what local
conventions suggest.
o Thinking and reasoning from a narrow and personal
point of view virtually guarantees that we have not
understood the situation fully.
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24. IDENTIFYING STAKEHOLDERS
o A major challenge to ethical decision making:
o Decisions involve the interests of multiple
stakeholders.
o Ethical decisions involve dilemmas:
o There are many perspectives and interests at stake.
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25. APPLICATION: IDENTIFYING
STAKEHOLDERS
o Try shifting your role:
o Rather than being in the position of the person who
discovers the I-Pod, what would you think of this
case if you were the person who lost it?
o How does that impact your thinking?
o What would your judgment be if you were the
friend who was asked for advice?
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26. APPLICATION: IDENTIFYING
STAKEHOLDERS
Let’s try it again:
o Consider Aaron Feuerstein’s decisions on the night of
his factory fire from chapter one.
o In his position, some people might think:
o How the fire would affect their own personal well-
being.
o The financial status of the owner and his family
was serious threatened by the fire
o A decision that considered only the owner’s point
of view, would not be a responsible decision.
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27. CONSIDER THE AVAILABLE
ALTERNATIVES
o Creativity in identifying options: Moral imagination.
o Moral imagination: Element that distinguishes
good people who make ethically responsible
decisions from good people who do not.
o Do not consider only the obvious options with regard
to a particular dilemma, but also the much more
subtle ones that might not be evident at first blush.
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28. APPLICATION: EXPLORING
ALTERNATIVES
o Consider the case of discovering a lost iPod.
o One person might decide to keep it because:
o She judges that the chances of discovering the true owner
are slim.
o If she doesn’t keep it, the next person to discover it will.
o Another person is able to think of some alternatives:
o One could return early for the next class to see who is
sitting at the desk.
o One could check to learn who the previous class teacher
was and ask that teacher for help in identifying the owner.
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29. COMPARE AND WEIGH THE
ALTERNATIVES
o Create a mental spreadsheet that evaluates the impact of each
alternative you have devised on each stakeholder you identify.
o Most helpful way to accomplish this task is to try to place oneself in
the other person’s position.
o Understanding a situation from another’s point of view.
o Weighing the alternatives will involve the following consequences
to all the relevant stakeholders:
o Likely
o Foreseeable
o Possible
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30. COMPARE AND WEIGH THE
ALTERNATIVES
o A critical element of this evaluation will be the consideration of
ways to mitigate, minimize, or compensate for any possible harmful
consequences or to increase and promote beneficial consequences.
o Additional factor in comparing and weighing alternatives
o Consideration of the effects of a decision on one’s own integrity,
virtue, and character.
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31. MAKING THE DECISION
o To be accountable in our decision making, it is not sufficient to
deliberate over the process.
o We should learn from our experiences.
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32. MONITORING THE OUTCOMES
o To be accountable in our decision-making, we have a responsibility:
o To evaluate the implications of our decisions.
o To monitor and then learn from the outcomes.
o To modify our actions accordingly when faced with similar challenges
in the future.
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33. WHY DO “GOOD” PEOPLE ENGAGE IN
“BAD” ACTS?
o There are many ways in which responsible decision making can go
wrong:
o People can simply choose to do something unethical.
o Well-intentioned people fail to choose ethically.
o Stumbling blocks to responsible decision-making and behavior
o Cognitive or intellectual.
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34. EXPLAINING “BAD” ACTS?
o According to the model of ethical decision making, a certain type of
ignorance can account for bad ethical choices.
o Ignorance can be willful and intentional.
o After you discover a lost I-Pod, you might rationalize to yourself that
no one will ever know, that no one is really going to be hurt, that if the
owner was so careless, they deserve to lose their I-Pod.
o You might try to justify the decision by telling yourself that you are
only doing what anyone else would do in this circumstance.
o You might choose not to think about it and try to put any guilty
feelings out of your mind.
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35. EXPLAINING “BAD” ACTS?
o Cognitive barrier: Considering only limited alternatives.
o Responsible decision making would require that we discipline
ourselves to explore additional methods of resolution.
o Simplified decision rules are most comfortable to us.
o Having a simple rule to follow can be reassuring to many decisions-
makers; even if it may not be the best possible decision.
o We often select the alternative that satisfies minimum decision
criteria: Satisficing.
o Other stumbling blocks
o Motivation
o Willpower
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36. DECISION POINT:
IF GRISHAM IS RIGHT . . . .
o If Grisham is correct, and we are destined to unintentionally cross
lines, perhaps it is critical to begin to make our lines more clearly
drawn.
o Try this exercise – in your head, consider your response to the
following questions:
o What values are most important to you? What are you willing to
sacrifice to maintain your own values? What is important? What are
your priorities?
o What do you stand for, personally and professionally?
o Are there any values that would you quit a job over?
o What would you be willing to die for?
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37. USUAL SUSPECTS FOR EXPLAINING
UNETHICAL CONDUCT
o Enormous amounts of corporate executive compensation.
o Lack of oversight of corporate executive decisions.
o Significant distance between decision makers and those they impact.
o Financial challenges.
o Set of ethical values that has not yet caught up to technological
advances.
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38. The most serious challenge we all face…..
Making ethically responsible decisions
throughout one’s life.
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39. ETHICAL DECISION-MAKING IN
MANAGERIAL ROLES
o Social circumstances can make it easier or more difficult to act in
accordance with one’s own judgment.
o Within business, an organization’s context sometimes make it
difficult for even the best-intentioned person to act ethically, or it
can make it difficult for a dishonest person to act unethically.
o Responsibility for the circumstances that can encourage ethical
behavior and discourage unethical behavior falls to the business
management and executive team.
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40. MANAGERIAL ROLES
o The decision-making model introduced in this chapter develops
from the point of view of an individual who finds herself/himself in
a particular situation.
o Personal integrity lies at the heart of such individual decision-
making:
o What kind of person am I?
o What are my values?
o What do I stand for?
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41. MANAGERIAL ROLES
o Within a business setting, individuals must consider the ethical
implications of both personal and professional decision making.
o Every individual fills a variety of social roles and these roles carry
with them a range of expectations, responsibilities, and duties.
o Some of our roles are social: friend, sondaughter, spouse, citizen,
neighbor.
o Some are institutional: manager, teacher, student body president.
o Some are professional: attorneys, accountants, auditors, financial
analysts.
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42. ROLES &
RESPONSIBILITIES
Decision-making in these contexts raises
broader questions of social responsibilities
and social justice.
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43. ROLES & RESPONSIBILITIES:
APPLICATION
o Consider how different roles might impact your judgment about the
discovery of the iPod.
o Your judgment about the iPod might differ greatly if:
o You knew that your friend had lost it.
o You were a teacher in the class.
o You were a member of the campus judicial board.
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44. ROLES & RESPONSIBILITIES IN
BUSINESS
o In a business context, individuals fill roles of employees, managers,
senior executives, board members.
o Managers, executives, board members have the ability to create and
shape the organizational context in which all employees make
decisions.
o Hence, they have a responsibility to promote organizational
arrangement that encourage ethical behavior and discourage unethical
behavior.
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45. DISCUSSION OF OPENING
DECISION POINT: WHAT WOULD YOU
DO?
o Try to determine the facts:
o Knowing that the iPod functioned perfectly would be good evidence
for concluding that it was left behind accidentally rather than
intentionally discarded.
o Knowing the actual cost of the iPod would also be evidence that it is
something likely to be highly valued and not something easily
abandoned.
o The situation raises ethical issues of rights, happiness, personal
integrity and honesty.
o It involves two major stakeholders: the true owner and yourself.
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46. DISCUSSION OF OPENING
DECISION POINT: WHAT WOULD YOU
DO?
o Any decision you make will have broader implications:
o It will encourage or diminish a campus culture of trust and honesty.
o Consider the following perspectives:
o Imagining yourself in the position of the student who lost the iPod/ the
student who might sit in judgment at a campus judicial hearing.
o Imagining the results of keeping the iPod and then having that fact
discovered and publicized.
o Considering the number of hours someone might have to work at an
on-campus job in order to earn enough money to buy another iPod.
o Reflecting on the type of person who keeps another’s property and to
ask yourself if this is who you really are and want to be.
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47. Corporate code of ethics.
Purposes…
o communicating the organisation’s values into a succinct and
sometimes memorable form
o the code serves to identify the key stakeholders and the
promotion of stakeholder rights and responsibilities
o code of ethics is a means of conveying these values to
stakeholders
o a code of ethics serves to influence and control individuals’
behaviour, especially internal stakeholders such as
management and employees
o a code of ethics can be an important part of an organisation’s
strategic positioning
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48. Group assignment
o Case study 1
o Case study 2
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49. CHAPTER TWO VOCABULARY TERMS
o After examining this chapter, you should have a clear understanding
of the following key terms and you will find them defined in the
glossary:
o Bounded ethicality
o Change blindness
o Ethical decision-making process
o Inattentional blindness
o Moral imagination
o Normative myopia
o Perceptual differences
o Personal and professional decision making
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50. End of Lecture 2
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