business ethics

What is business?

The combination of heterogeneous forms of capital to create and capture value

It involves experimentation to find novel combinations of valuable resources

It involves collaboration because work is often a matter of team production 

What is ethics? 

The search for and pursuit of a worthy goal 

All action is goal directed, ethics seeks a worthwhile goal 

Includes but is not reducible to a code of rules or set of principles

What is business ethics?

Ethics in the context of contemporary organizations – firms. 

Organizations are ubiquitous in modern society so ethics must be business ethics 

Living well in an organizational context.

The atomistic view of business and society 

This is the dominant view of business

This view has a number of limitations

Individuals are isolated social atoms

Individuals only interact with others in order to achieve their individual goals 

The firm and society are an only matter of contracts (the social contract and the nexus of contracts view of the firm)  

What is wrong with the atomistic view? 

Business needs laws and social institutions to function well – a concern for the common good 

An excessive focus on individual interests undermines trust and identification with society and business needs these things.

Persons gain an understanding of worthy aims from social relationships

Personal identity is a product of a social relationship 

Persons are always dependent upon others

Why we need the virtues 

In order to identify and pursue worthy goals 

In an organizational context externally in order to preserve institutional environment needed for business practice

Internally in order to promote cooperation needed for increased trust, efficiency, innovation, and excellent work 

Business ethics in the firm 

Cultivating the practice or craft in an organization 

The activity that captures the fundamental purpose of the firm 

Requires virtues such as justice, truthfulness and courage

The formal organization

Increasing profits and preserving the craft

There is always a tension between short and long-term

In the long term ethical business practices are profitable 

Good accounting firms make money by doing good accounting 

Networks of giving and receiving and the firm as a community of persons

Organization members are vulnerable 

At times org members must go beyond their role and come to the assistance of fellow members 

Organization members must not allow internal competition to undermine personal relations 

Virtuous relationship with stakeholders

Recognizing the many ways that business serves the common good 

Enabling employees to define and understand the mission of the firm 

Promoting environmental sustainability 

Ethical business is often good business

What is an organization?

A purposive aggregation of individuals who exert concentered effort toward a common and explicitly recognized goal 

Shared purpose

Contrast with a crowd 

Structured relationships


Statuses/ authority

Contrast with open source communities

Why do organizations exist? 

The growth of technology

Team production – joint production is more efficient

Lower transaction costs

Development of knowledge

Theories of the firm

A means of minimizing transactions costs

A nexus of contracts

Team production/ knowledge-based view of the firm 

CSR and Business Ethics

CSR focuses on the firm’s relationships with external stakeholders

Business ethics often focuses on compliance or malfeasance 

In this course we focus on human flourishing in an organization context


Organizational level: 

Normative – stakeholder theory

Strategic – expected return 

Political – corporate citizenship

Social – legitimacy 

Limitations of CSR?

Not directly related to the purpose of the business 


What does “social” mean?

Are moral notions relevant?

What is business ethics? 

Individual level 

Drawn from moral philosophy 




Two dominant approaches – deontology and utilitarianism are principle-based 

Draw up abstract principles 

“applied” to business situation 

Practice / institution 


Firms as practices and institutions 

Practices or crafts

Internal goals that develop over time 

Contribute to participants’ and societal wellbeing


Formal organizations 

Focused on profits status and power


“by a practice I am going to mean any coherent and complex form of socially established cooperative human activity through which goods internal to that form of activity through which goods internal to that form of activity are realized in the course of trying to achieve those standards of excellence which are appropriate to, and partially definitive of, that form of activity, with the results that human powers to achieve excellence, and human conceptions of the ends and goods involved, are systematically extended”. 


Professions (doctors) 



Organizations/ management 


Are lasting qualities that motivate you to act. 

Reasons for action appeal to the virtues 

Reasons for action ultimately appeal to one’s conception of the good life

Virtue ethics – seven characteristics

Virtue ethics is actor – or person- oriented and concerned about the development of character. But this does not mean that it is unconcerned about actions.

There is a very strong emphasis on the idea of purpose or telos; the virtues are the qualities of character which enable us in the pursuit of the projects and purposes, the ends and the good, in our lives. 

Virtues are different from the knowledge and technical skills are essential to performing a role well, they are not enough. In addition, we need the virtues.

Virtues are deep-seated dispositions so that in possessing them there should be a harmony between our feelings, desires, thoughts, and actions. The person of true virtue possesses and exercises all the virtues in concert. 

The teleological nature of virtue ethics means that we are on a narrative quest, continually attempting to understand what more and what else our purposes in life might be. 

But this is not just an individual quest. We are also members of various communities and our good and the common good of these various communities are intertwined. 

Involves pursuit of excellence in whatever it is that we undertake, benefiting both ourselves and the community or communities of which we are a part.

Virtues are not something you think about they typically become very important in the workplace. 

Virtues are reasons for action: 

appeal to the virtues. 

Ultimately appeal to one’s conception of the good life. 

Macintyre’s organizational ethics 

Goods of excellence 

Goods of effectiveness 


Crafts, professions, practices

Institutions as formal organizations 

Goodness of purpose

Goods of excellence 

Specific to the activity 

Perfection of the agent 

Excellent products and services 

Life of excellence 

Goods of effectiveness

Money, power, status, market share, profit, etc. 


Instrumental goods 

The role of the virtues 

Justice, courage & truthfulness 

Perseverance and magnanimity 


Integrity and constancy 






Formal organizations 

The institutionalization of practices 

Focused on money, power and status 

Management as a craft 

Does management have a purpose? 

Balancing profit and excellence 

Shaping the organization toward the needs of society 

Goodness of purpose 

Contributes useful goods and services 

Promote development/ excellence within members 

The ethical quality of the organization can make a difference in being successful 

In business ethics we are concerned about effectiveness, excellence and virtue. 

The moral obligation to seek profits 

Put in a formal way, the argument runs as follows: 

In a publicly held firm the managers (CEOs and the top management team) have entered into a contract with the stockholders. 

A contract is a type of promise 

The terms of the contract are that the managers should attempt to seek profits for the stockholders. 

Keeping a promise is a perfect duty. 

Therefore, managers have a moral obligation – indeed a perfect duty – to seek profit. 

Why do humans beings need the virtues? 

In order to achieve excellence in practices?

In order to maintain organizations?

Because we are vulnerable???

Human beings as dependent rational animals 

We are vulnerable to anything that we need for wellbeing 

We are dependent on others because we operate under bounded rationality 

We often refuse to acknowledge our vulnerability 

Networks of giving and receiving 

Relationships of uncalculated giving and receiving 

We are dependent upon others for care in such relationships 

They are vital for our wellbeing 

The virtues of acknowledged dependence 

Just generosity: reciprocal gift-giving 

Mercy: meeting the needs of others 

Beneficence: doing good for others 

Becoming an independent rational practical reasoner 

Good counsel – a potential part of prudence 

Care facilities practical reasoning 

We continually depend upon others to be independent 

Networks of giving and receiving in an organizational context 

OCB and helping behavior

“thick” ties: you want to have them because if you have a problem and you have a supplier that you have a relation with they will help you out. 

OCB & Helping 

Extra-role behavior directed toward fellow organization members

Cooperative behavior that benefits others 

“thick” ties

Business friendships that improve production 

Both parties benefit 

Givers and takers 

Some are givers with pro-social motives

Some are takers with self-interested motives

Most are matchers who give when given and take when taken by others 

Organizational governance systems which crowd in virtue 

Need for the recruitment of a sufficient proportion of givers, those with a pro-social intrinsic motivation who naturally pursue the common good. 

Focus on recruitment strategy needed to find mechanisms for assessing the character of potential members. 

Without enough givers the matchers will begin to act like takers. 

Rights and relationship in the firm 

Can we talk about employee rights?

Why is right-talk important? 

What are some employee rights?

Revisiting the employee employer relationship

What is an employee?

A member of a profession or craft

A member of the joint production process of the organization 

A member of various networks of giving and receiving 

Professions as practices

Shared goods internal to the profession 

Common standards of excellence/ professionalism 

Supports the common good of society not just the organization 

Promotes well being person

Employees are expected

To promote the aims of the profession &

To observe the standards professionalism

To promote the wellbeing of society

To be virtuous

Joint production in the firm 

Work in the firm is a common project including all members

Employees are expected to cooperate

Loyalty to the organization is required

Employees must use judgment and take responsibility 

Networks of giving and receiving in the organization 

Uncalculating relationships 

Reciprocal gift-giving

Directed toward urgent needs

Crosses formal organizational lines

Promotes individual and organizational wellbeing

What do employers expect from employees? 

Exercise professional judgment

Exercise virtues including loyalty

To act generously toward others (helping behavior)

To go beyond the contract

Professional judgment

To act rationally – good reasons

Cannot be merely rule-following

Implicitly or explicitly involves a concern for common good


To cooperate for the good of the organization 

To go beyond the contract

To give a damn about the organization 

To be a good organizational citizen

To engage in helping behavior

To participate in networks of giving and receiving 

To be a good community member

Do employees have rights? 

Yes – because relationships go beyond contracts

The basis of employee rights

Relationship in the firm are structured in terms of duties

These relationships entail corresponding rights 

Due process 

basic legal right in the US. Employees should be given due process. 

Involves when someone is fired or laid off. There is a commitment to explain the reasons why did they do it. 

So they should be giving good reasons. 

Employees should be given explanations on why is the company reorganizing the employees. 


Shifting jobs



Participation in governance 

Employee voice (having a voice). 



Employability: a basic component of the employment relationship 

Safe working conditions

Living wage 

For the exam: talk about the quality of the relationship between employees and employers.

The golden rule 

Don’t do to others what you wouldn’t like to be done to you. 

In decision theory it is just a formalization. 

the sociological foundation of the virtues 

The common goods of society

Practices/ professions/ crafts

Formal organizations


Professional ethics

Aiming for internal good

Caution about the formal organization

Build community at work 

Practice the virtues

Implications of practice/ institutional for individuals 

Individual narratives


Community narratives


Constancy:requires that those who possess it pursue the same goods through extended periods of time, not allowing the requirements of changing social contexts to distract them from their commitments or to redirect them. We are dependent upon others for care in such relationships.

To have integrityis to refuse to be, to have educated oneself so that one is no longer able to be, one kind of person in one social contexts. It is to have set inflexible limits to one’s adaptability to the roles that one may be called upon to play…(to) exhibit the same moral character in different social contexts. 

Reasons for action 

Goods within practice

Good of life as a whole 

The good of my community

Good of my traditions

Meaningful of work 

What is meaningful work?



Constitutive dimensions

How work contributes to; 

Individual wellbeing

The common good 

The role of virtues 

Virtue and meaningful work 

Subjective dimension 

Objective dimension 

Constitutive role of the virtues

Subjective dimension of meaningful work 

Self-conscious extension of your abilities

Extension of both skills and judgment

Job design for meaningful work 

Skill variety 

Task identity: 

Do employees do the job from start to finish?

Task significance

What is the impact of the work 


Do employees have decision rights? 

Task identity

Do employees do the job from start to finish? 

Job recognition 

Objective dimension of good work

Excellent products and services

Development of employees

Development of other stakeholders 

Virtues and meaningful work 

Constitutive of meaningfulness/ shape agency from the inside

Direct agents to act for excellence and good purpose 

Avoid instrumentalizing work for success (goods of effectiveness) 

The role of virtues

Temperance: the lure of comfort

Courage: willingness to stand up for the standards of the practice

Justice and truthfulness

Practical wisdom

Integrity and constancy

Meaningful work as a need

Meaningful work contributes to the development of freedom and sense dignity 

Without meaningful work we may experience alienation

“The harms of non-meaningful work undermine an individual’s ability to participate in the work of social cooperation over a lifetime by: stunting the development of her capabilities for free and autonomous action; undermining her sense of self-esteem and self-worth, of her standing in relation to others; and thwarting her sense of efficacy, of being able to act with others upon the world. Together, these harms to capabilities, status and efficacy reduce a person’s ability to build the practical identity necessary to securing a sense that her life has meaning.”

Benefits of meaningful work 

Increased motivation/ job satisfaction 


Organization identification 

Decreased absenteeism and stress

Two types of practice: professions 

Professions/ crafts

Accountants, doctors, nurses, lawyers, architects, engineers, plumbers, electricians, carpenters

Clearly defined role that extends beyond any specific organization? 

Does this model fit every job? 

Accounting as a practice

Provides a moral identity 

A respectable way that persons contribute to society

Offers norms of conduct 

Requires virtues

Joint production as a practice

The organization as a practice

How does the organization as a practice differ from professions as practices?

What are some characteristics of joint production as a practice?

There is a difference in the role of institutions 

What are the characteristics of management as practice? 


Based upon core practice(s)

Provides values and purposes to core practice 

Promotes unity and cooperation of members

Gains support/legitimacy from outside stakeholders 

Capability development work 

Setting up, enacting, and refining routinized ways of reliably performing a coordinated set of tasks for the sake of achieving an intermediate end, which contributes to the organizational purpose at hand. 

Differentiation work 

Relating the products and services of core practices to the changing needs of customers to ensure the ongoing economic viability of core practices. 

Undertaken by senior managers and/or heads of designated units (via strategic planning analysis, strategy, workshops, or ad hoc committee decisions, etc.) to examine its competitive advantages and explore ways these may be sustained, developed, or changed, in light of evolving stakeholder values and needs. 

Characteristics of the good manager

Concern for a good purpose

Concern for the integrity of the craft

Promote meaningful work 

Pursuit of profitability 

Promote suitability institutional form 

Concern for a suitable environment 

Promote a virtuous organization 


Do managers need virtues? 

Practical wisdom 




Topic 9 : creating and sustaining a virtuous organization

What are some requirements of a virtuous organizations 

Meaningful work 

Job design 

Good purpose 

Long-term success

Profitable strategy 

Sustainable business model 

Characteristics of a virtuous organization

1.Centered on core practice (why?)

1.Firms make commitments through the core practice 

2.Focused on excellence in the core practice.

3.Promotes meaningful work

4.Successful strategy 

5.Good mode of institutionalization

6.Conducive external environment

7.Organizational Virtue

Successful strategy

Capability Development work 

Setting up, enacting, and refining routinized ways of reliably performing a coordinated  set of tasks for the sake of achieving      an intermediate end, which contributes to the organizational purpose at hand.

Differentiation Work

Relating the products and services of core practices to the changing needs of customers to ensure the ongoing economic viability of core practices. 

Undertaken by senior managers and/or heads of designated units   (via strategic planning analysis, strategy workshops, or ad hoc committee decisions, etc.), to examine its competitive advantages and explore ways these may be sustained, developed, or changed, in light of evolving stakeholder values and needs

Mode of institutionalization 

For-profit bureaucracy 

Employee-owned cooperative


For-profit bureaucracy 

Shareholders control de company 

Board appoints CEO 

CEO faces pressure from the stock market

Could face a buyout

Enabling bureaucracy 


Internal/ Global transparency




Employee-owned cooperatives

Owned by employees

Governed by participatory-governance practices

Self-financed (or financed through debt)

Limited in the ability to acquire capital 



Highly formalized 

Participatory governance

Institutional work 

Creation of new professional standards

Seeking new regulations