1. Week 1 – Ethical decision-making

2.  Some housekeeping matters
◦ Class allocations
◦ 3 hour structure
◦ Textbook – 5th edition
◦ Unit Outline and Week 1 Doc
◦ Blackboard site

3.  Attend classes regularly
 Come PREPARED. The lectorial has ‘tutorial’
aspects, so you need to prepare for them,
otherwise you are just wasting your time.
 Be willing to do work and participate in class – part
of the lectorial involves students working on
problems. Students should also ask questions and
discuss issues.
 Attempt all questions done in class, especially in
the second half of the unit when we do
‘hypothetical’ style problems.

4.  What affects a business’ decisions?
 Obviously profit, but do we have a truly
‘free market’ to conduct our business in?
Should we? Why/Why not?
 In BSB111 we look at the legal system and
specific laws that are important to business
(such as contract law, consumer protection
law). But we also examine regulation and
ethics as other factors which would play a
part in business decision-making.

5. Internal Forces
Type of Business Structure
Ethics
CSR
Corporate Governance
BUSINESS
DECISIONS
External (Legal) Forces External (Structural) Forces
Contract Law Legal System
Agency Dispute Resolution
Tort Law Regulation
Consumer Law

6.  What is ethics?
◦ Why study ethics?
◦ Evolution of ethics
◦ Business ethics?
◦ Law and ethics
◦ The role of conscience
 Kohlberg’s theory of moral development
 Approaches to ethical theory
◦ Outcome-based
◦ Code-based
◦ Character-based

7.  You should read the textbook (readings 1, 2
and 3) to gain a fuller understanding of the
theories discussed in these slides.
 It is important that you understand them
because they are relevant to your assignment
task – ethics case study.

8.  Read the WorldCom excerpt (on BB) and
consider Cynthia Cooper’s dilemma.
 Do you think something like that could
happen to you in the future? Or do you think
you will never experience ethical dilemmas in
your life?
 What other examples of ethical dilemmas can
you think of?

9.  Ethics is primarily concerned with how we should
behave. It involves theories that describe the ‘right’
way to make a decision.
 Morality is concerned with social practices defining
right or wrong. Ethical theory point to reflection on
the nature and justification of right actions.
 Morality, we might say, consists of what persons
ought to do to conform to society’s norms of
behaviour, whereas ethical theory concerns the
philosophical reasons for and against aspects of
social morality.
 For example, morally, society says that stealing is
wrong. Ethical theory examines and explains why.

10.  Ethics has its origins in the writings of
ancient philosophers such as Socrates,
Aristotle, and Confucius.
 In a business sense, ethics has become far
more prominent since the 1980’s, when the
‘greed is good’ position started to result in
scandalous corporate collapses.
 WorldCom is one example of a corporate
collapse that occurred in the US. Enron is
another. We will look at these two cases and
Australian examples in week 2.

11.  Is ethics relevant to business? Some might argue
that the concept of ‘business ethics’ is
incompatible with a business’ goal of making a
profit.
 Others argue that businesses should be ethical
because being ethical is good for the bottom line
(Harrison, p3), whilst others say that business
should be ethical because being ethical is the right
thing to do (Harrison, p3).
 The aim of teaching ethics in this unit is to
stimulate and provoke thought, rather than to
advocate a particular method or ethical position.
The process is more important than the answer.
There is NOT necessarily a right answer!!!

12.  Is mere compliance with the law enough?
Arguably not – society expects more.
 Why? Law can be limited because:
◦ it is simply not possible to predict and therefore
outlaw all situations that give rise to bad conduct.
◦ law usually lags behind social trends because the
law-making process is slow and reactive.
◦ the law itself is sometimes viewed as deficient
and for this reason should not be treated or seen
as some sort of ethical or moral high ground
(‘bad’ law).

13.  Some people say that ‘let your conscience be
your guide’ is what morality is all about.
 But philosophers say that just relying on
conscience is not sufficient for ethical
judgment.
 Everyone’s conscience is different, and is
formed by life circumstances, religious belief,
childhood, training etc.
 So it isn’t sufficient to rely just on conscience,
moral justification must be based on a source
external to individual conscience.

14.  What can influence a person’s answer to
ethical dilemmas? Personal moral
development is one factor.
 Lawrence Kohlberg is famous for his theory
of “cognitive moral reasoning and
development” in which he mapped out
various stages in which individuals pass
through on their way to moral maturity.
 Essentially three levels of development, of
which each level can be broken down into 2
stages (giving a total of 6 stages).

15. LEVEL ONE: PRE-CONVENTIONAL
Summary note: an individuals’ focus at this level is exclusively self-centred
such that ethical decisions will only be made if they bring about a benefit.
1. Individuals at this primary stage of maturity in ethical decisions will
conduct themselves in an ethical manner in order to avoid punishment.
It follows that if the perceived risk of detection is low and/or the
punishment is low, then individuals will take a course of action that
minimises personal harm and maximises personal gain – irrespective of
whether such action is ethical or not; or if it has an adverse impact on
others.
2. At this stage, individuals will only conduct themselves in an ethical
manner if in doing so brings about a benefit; and will only consider the
interests of others if there is a mutual benefit.

16.  People at this level, and certainly all young
children, have no innate sense of morality but they
have learned that certain actions bring praise while
others bring punishment.
 In the stage 1 of level 1, they react to punishment.
For eg, toddlers don’t have any sense of moral
right and wrong, but they soon learn that if they
write on the living room wall with a crayon they will
get scolded or otherwise punished. What keeps
them from writing on the wall is their desire to
avoid punishment.
 So this stage involves unwitting compliance to
avoid punishment.

17.  Personal gain and the wish not to miss out
on good things characterises moral thinking
at the stage 2 of level 1.
 People evaluate options according to the
benefits they might gain and reflects their
desire to receive a reward.
 All of us to some extent react to pleasure
and pain and reward and punishment. So all
of us sometimes act on the preconventional
level.

18. LEVEL TWO: CONVENTIONAL
Summary note: individuals at this secondary stage are increasingly concerned
with conforming and maintaining relationships within a community
• At this stage of maturity, individuals conduct themselves in an ethical
manner to please or avoid being frowned upon by the immediate group
of people around them such as family and friends.
• The actions of individuals at this stage are motivated to conform to the
norms and rules of the greater community in order to preserve and
respect social harmony. In business, these individuals will be guided by
company policies, codes of conduct, and the law.

19.  In stage 3 of Level 2, a person responds to their
social role by thinking about morality in terms of
being a ‘Nice boy/Good girl’.
 At this stage people accept as legitimate the social
norms and expectations of the groups they belong
to. For example, they conform to the norms
learned at home, in school.
 This stage does not involve ethical thought about
the issues. People abide by the social norms not
because they have analysed them and concluded
they are correct but because they wish to be
socially accepted.

20.  In stage four of level 2, conformity is with
the laws of one’s society.
 The individual understands what a good
citizen is supposed to be and do and lives
in accordance with the conventional rules
that govern the society.
 Most adults live at the level of conformity
morality. Some may not go beyond this level.

21. LEVEL THREE: POST-CONVENTIONAL
Summary note: individuals at this stage go beyond the mere compliance to the
law and are motivated by moral/ethical principles
1. Whilst individuals at this stage of maturity respect and follow laws, they
will evaluate and question the appropriateness of the laws and seek
change where they are inconsistent with ethical principles.
2. At this large stage of maturity, individuals make decisions based entirely
on ethical principles.

22.  In Stage 5 people are capable of questioning and
reflecting upon the systems and principles or
morality that they follow. For example,
◦ ‘Is what my society holds to be right really right?’
◦ ‘Why should I accept what my parents told me is right or wrong?’
◦ ‘Why should I accept what the laws say is right and wrong’?
 People challenge the prevailing morality and may
seek to change it in accordance with their own
reflections.
 They might for example campaign to change the
law on cigarette advertising because they think it
would advance social justice to do so.

23.  In Stage 6, we are able to give a rational
defence of the moral principles that guide
our actions.
 It is at the third level that ethical theory
operates.

24.  Although most people move up through the stages of moral
development as they get older, it is possible for some people
to remain stuck at one of the earlier stages of moral
development.
 Kids will generally hover around stages 1 and 2, reaching
stage 3 by mid teens and then developing further from the
ages 16 – 24. An individual’s strength of character and
respective life experiences will determine the rate at which
she or he will mature.
 Kohlberg believes that reaching stages 5 and 6 (post-
conventional) of moral reasoning takes a high degree of
maturation which, if at all, is attained by people in their late
20s and beyond. Only a few people reach states 5 and 6
(post-conventional), most people do not develop beyond
stages 3 and 4 (conventional) moral decision making.

25.  Not everyone will advance to the third level;
and no one operates only on the third level.
 Most people operates sometimes on one level
and sometimes on another.
 Your textbook reading 1 has two additional
stages – zero and seven. For BSB111, please
disregard these stages.

26.  Do question 1 on your week 1 activity sheet

27.  Terms to describe different focuses of study:
◦ Descriptive (Scientific) approach: scholars examine
the actual moral practices of a society (eg
anthropologists, sociologists).
◦ Conceptual approach: analysis of the meaning of
key terms (concepts), eg: right, obligation, justice,
good etc.
◦ Prescriptive (Normative) approach: aims to
determine what ought to be done, rather than
what is done.
◦ We’re studying this approach in BSB111.

28.  Ethical theories attempt to systematize ordinary
moral judgments, and to establish and defend
basic moral principles (De George, p49).
 Ethical theory explains why actions are right or
wrong by providing a decision making procedure
for resolving difficult cases (De George, p49).
 Ethical theory also makes it possible for an
individual to explain and justify his/her decision to
others (De George, p49).
 There is no one ethical theory that all people or
philosophers agree. In BSB111, we study three
different approaches.

29. Teleogical Deontological Virtue Ethics
(Outcome-
based) (Duty-based) (Character-based)
Focus is on the Focus is on the Focus is on
consequences process used, whether a ‘good’
(outcome) of a e.g. doing social person, i.e. good
decision. The
ends can justify duty, follow virtues, would do
the means principles etc the act
Egoism Kantian ethics Virtue ethics
Utilitarianism

30.  Do Question 2 in your week 1 activity sheet

31.  Ethical egoism is a theory stating that the
supreme principle of conduct is to promote
one’s well being - everyone ought to act on
the basis of self interest.
 Supporters of ethical egoism argue that
acting against one’s interest is contrary to
reason. It is not their view that one should
always ignore the interests of others, but that
one should take account of and act on the
interests of others only if it suits one’s own
interests to do so.

32.  This does not mean that the egoist will always
be greedy or selfish, but that the motivation for
acting will be to gain benefit themselves:
◦ may be by undergoing a short-term sacrifice or
pain, or by doing something that benefits another
in the hope of reciprocation or gaining some
intangible benefit like satisfaction, praise or fame –
or to avoid the detriment of punishment (eg by
following laws and rules).

33.  Would egoism cause anarchy and chaos? Some
philosophers say ‘yes’.
 Imagine a world with limited resources, where
persons are approximately equal in their ability to
harm one another and where everyone acts
exclusively in his or her interest. Hobbes argued
that in such a world everyone would be at everyone
else’s throat, and society would be plagued by
anxiety, violence, and constant danger…life would
be “solitary, poor, nasty, brutish and short”.
Hobbes argued for a strong government to stop
this from happening (textbook reading 2 p24).

34.  Other proponents of ethical egoism argue
that human beings are rational enough to
avoid war of all against all, and so we
voluntarily assume moral obligations to
others because it is in our own best
interests.
 Egoists also argue that only an unduly
narrow conception of self interest would
lead to the argument that an egoist will not
be willing to observe conventional rules
(textbook reading 2 p24).

35.  Utilitarian theory hold that the moral worth of actions is
determined by their consequences. An action is right if it
leads to the best possible balance of good consequences
over bad consequences for all the parties affected.
 Influential figures include Jeremy Bentham (1748-1832)
and John Stuart Mill (1806-1873).
 ‘Good’ refers to happiness or pleasure according to
hedonists Bentham and Mill. Later utilitarians argued that
other concepts such as friendship, knowledge, courage
etc are also valuable.
 Good is measured in total – an act causing a large
unhappiness to one person can be outweighed by a small
increase in happiness to lots of people (and vice-versa).

36.  Difficulties with utilitarianism come with
measurement. Bentham and Mill both had theories
on how to measure pleasure, with limited practical
value. For example, Bentham identified the
following features of happiness:
◦ Intensity: the strength of happiness
◦ Duration: the length of time happiness lasts
◦ Certainty: the probability of happiness resulting
◦ Extent: the number of people effected
◦ Closeness: is the pleasure now or later in time?
◦ Richness: will the act lead to further pleasure?
◦ Purity: is it all pleasure, or mixed with some pain?

37.  Another difficulty is all types of ‘good’ may not be
equally valuable to all people (eg the saying that
‘money can’t buy love’ would not be followed by
everyone).
 Another example, in deciding whether to open a
pristine Alaskan wildlife preserve to oil exploration
and drilling, how does one compare the combined
value of an increased in the oil supply, jobs and
consumer purchasing power with the value of
wildlife preservation and environmental protection?

38.  A further criticism is that it ignores important
moral factors such as justice.
Example (units of happiness):
Option 1 Option 2 Option 3
Anne 2 9 9
Ben 2 1 5
Chris 2 1 2
Dan 2 0 -2
Ellie 2 0 -2
TOTAL 10 11 12
Utilitarianism demands option
3, but is it the most just?

39.  You can see from the previous slide that Utility is measured
as a whole – it advocates choosing the option that gives the
greatest good.
 Even though Option 1 created good for the greatest number
of people, Option 3 creates the greatest good. If there were 2
options that were equal, then go with what benefits the
greatest number.
 Another example, suppose insurance companies are allowed
to weed out those covered because they have some
characteristics that are statistically associated with an
enhanced risk of injury or disease (such as genetic disorders).
Suppose such policies would on balance serve the public’s
interest by lowering insurance costs. Utilitarianism would
justify the action of insurance companies denying insurance
coverage to these persons but would this denial be unjust?

40.  Do question 3 on your week 1 activity sheet

41.  Deontological approach to ethics is that
actions are morally right or wrong
independent of their consequences. Moral
rightness does not depend on how much
good is produced. So this approach is very
different to utilitarianism and egoism.
 It focuses on one’s duty to do what is morally
right and to avoid what is morally wrong,
regardless of the consequences.
 The major ethical theorist of deontology is
Immanuel Kant.

42.  The essence of this approach is that these
duties guide our behaviour.
 And it is the process of making the decision
(i.e. following the duties) that is the
important factor, not the outcome of the
decision.
 Doing the right thing for the wrong reasons
cheapens the result. Actions must come from
a sense of duty.

43.  Kant wrote of the ‘Categorical Imperative’.
 The Categorical Imperative states the form
moral actions have and provides the criteria
against which we can test whether an action
is moral (De George, p82).
 Kant gave three formulations of the
Categorical Imperative. These state the
three formal conditions that an action must
have if it is to be a moral action (De George,
p82).

44.  For an action to be a moral action:
1. It must be amenable to being made consistently
universal - Universal acceptability – can the act
be a rule performed by everyone without
contradiction?
2. It must respect rational beings as ends in
themselves - Respect for persons – treating a
person exclusively as a means to some end fails
to give them respect.
3. Reversibility – would you like to be on the
receiving end of such action?

45.  For universal acceptability – it is an inquiry as to whether the
rule or the maxim of an action can be internally consistent
when made universal (De George, p83). Examples:
 1) Consider the action of killing, in anger, another human
being. Stated as a rule, it would read: “Kill others whenever
you are angry at them”. Can this rule be made consistently
universal? Because it is likely that everyone gets angry at
someone at some time, and because it is likely that everyone
has had someone angry at him at some time, if everyone
followed this rule we would kill each other off. If we all
followed this rule, none of us would be alive to continue
following it. The rule therefore when made universal leads to
its own demise so that lies the inconsistency (De George
p83).

46.  2) Suppose a person considers breaking a promise
to a co-worker that would be inconvenient to keep.
First formulate his/her reason as a universal rule.
The rule would say “Everyone should break their
promises whenever keeping it is inconvenient”.
Such a rule is contradictory because it would mean
that the practice of making promises would be
senseless (reading 2, p33).
 A rule that allows cheating on an exam negates the
purpose of testing.

47.  Do Question 4 of your week 1 activity sheet

48.  The theories of utilitarianism and Kantian
ethics are more legalistic in their approach,
focusing more on obligations and rights.
 These theories don’t look at the person
performing the action. So in recent years
some philosophers have argued for a virtue
based moral theory (De George, p106).
 Virtue ethics comes from philosophers such
as Plato and Aristotle in which the cultivation
of a virtuous character is seen as morality’s
primary function.

49.  Virtue ethics is not a system of rules, but a
set of personal characteristics that, if
practised, will ensure that the individual is
likely to make the ‘right’ choice in any
ethical dilemma they are faced with.
 So a person faced with an ethical dilemma
using virtue ethics as a guide will ask the
question ‘what would a virtuous person do
in this situation’?

50.  What are virtues? Virtues are not ‘ends’,
they are ‘means’. They are personal
qualities that provide the basis for the
individual to lead a good, noble, or ‘happy’
life.
 Plato identified four virtues : wisdom,
courage, self-control, and justice.
 Aristotle then expanded upon the number
of personal qualities that could be regarded
as virtues.

51.  From Aristotle came qualities such as:
◦ Liberality (the virtuous attitude towards money)
◦ Patience (the virtuous response to minor
provocation)
◦ Amiability (the virtue of personal persona)
◦ Truthfulness
◦ Indifference (in relation to the seeking of public
recognition of achievement)
 See next slide for the complete table. This is
taken from your textbook.

53.  For Aristotle, those personal qualities that were
regarded as virtues were reflected in behaviours
that represented a balance, or mean, in terms of
the particular personal quality being considered.
 So if the response of an individual to the threat of a
‘danger or significant personal challenge’ was
being considered, the personal qualities of
cowardice and recklessness would lead to
detrimental outcomes. So a virtuous person would
have to overcome his fears but avoid acts of
rashness. This intermediate mean or disposition is
called ‘courage’.

54.  The virtues of Aristotle can be said to be virtues
from a masculine perspective (women didn’t
feature prominently in those days).
 Carol Gilligan, a former student of Kohlberg took
issue with the use of justice as the pre-eminent
determinant of moral reasoning.
 Within Kohlberg’s studies fewer females than males
displayed the form of moral reasoning that can be
classified as reasoning at the highest levels of
Kohlberg’s hierarchy.

55.  Gilligan argued that this is because the form of
reasoning displayed by women is different to that
held by men, and not because women used a lower
form of reasoning.
 She argued that women’s early socialisation
processes (particularly observing their mothers)
encourage them to seek out compromises, not to
allocate blame exclusively to one side or the other
nor to give praise exclusively to one member of a
group. Rather the resolution of arguments is
achieved with a sense of ‘everyone gets something’.

56.  Gilligan argued that women had a longer-term
viewpoint, that is if a family unit was to function
effectively, there must be give and take from both
sides.
 The wisdom used in reasoning this way Gilligan
referred to as ‘care’.
 To add Gilligan’s ethics of care into Aristotle’s
framework:
◦ Vice of deficiency: Inflexible rule following
◦ Virtue: Care/wisdom
◦ Vice of excess: Appeasement

57.  Answer Question 5 in your week 1 activity
sheet

58.  Many people prefer to avoid the problem rather
than confront and acknowledge an ethical dilemma.
Such techniques include (Jennings, pp45-47):
◦ Calling it by a different name (eg copyright infringement
termed ‘peer-to-peer file sharing’)
◦ “Everybody else does it”
◦ “If we don’t do it, someone else will”
◦ “That’s the way it’s always been done”
◦ “We wait until the lawyers tell us it’s wrong”
◦ “It doesn’t really hurt anyone”
◦ “The system is unfair”
◦ “I was just following orders”
 Ultimately, a person’s decision will depend on their
moral development and which ethical theory they
find more appropriate.

59.  Answer question 6 on your week 1 activity
sheet

60. 1. Read Readings 1, 2 and 3 in your textbook. It will
help with understanding the ethical theories
discussed in this lecture and this will be useful
when you do your ethics case study.
2. Read the document ‘Ethics Case Study Topic and
Instruction. This is the first piece of assessment
for BSB111.
3. It is also ESSENTIAL that you do next week’s
reading before class. This is “Reading 4” in the
textbook, 2 articles on Corporate Social
Responsibility, which we be analysing in class.