UPI Study › Courses › Foundations of Leadership › Free lessons › Lesson 9.1 Free with a free account
Ethics in Modern Business: Principles, Frameworks and Codes
Foundations of Leadership · Chapter 9: Core ModuleSection 9.1 · lesson 59 of 9014 min · free with a free account
Free preview
Create a free account to keep watching
It takes a minute and costs nothing. Your free account unlocks all of Chapter 1 and 3 more lessons of Foundations of Leadership.
Lesson complete
Earn the 3 college credits for Foundations of Leadership
Enrolling adds a quiz after each lesson, the graded work and the official transcript. Recommended for credit by NCCRS.
Next lesson: Corporate Social Responsibility and Ethics in Project Management →← Business Meetings: Formal and Informal VarietiesNext lesson: Corporate Social Responsibility and Ethics in Project Management →
In this lesson
Five competing frameworks, and why picking a winner is the wrong move.
- Separate the ethical test from the legal one
- Compare the five frameworks and the question each asks
- Work a decision through a structured six-step process
- Judge when a code shapes conduct and when it is theatre
Free study notes
Get this lesson's notes by email
The key points and 4 practice questions with answers, in your inbox. One email, free.
One email. Unsubscribe in one click.
Transcript
Everything said in the video, section by section (1,829 words). Read along, or search it.
Core Module
Ethics in Modern Business
For most of the last century, business ethics sat at the edge of management. It was invoked after a scandal, and otherwise left to private conscience. That has changed. And not because managers suddenly became more virtuous. Globalisation put firms into regulatory environments no single national tradition prepared them for. Information technology stripped away the privacy that once shielded commercial conduct. And stakeholder activism turned reputation into an asset you can measure. So this section covers the frameworks managers reason with, and the machinery that makes reasoning routine. One warning up front. We will not settle which theory is correct - philosophy has not managed that in two thousand years.
The Shift
From Private Conscience to Core Competence
Start with the shift itself, because it explains why the subject is here at all. Ethics was once a marginal concern, raised at scandals and otherwise ignored. It is now a central preoccupation of strategy, governance and daily practice. Three forces drove that. The first is globalisation. A firm now works across regulatory environments more diverse than any one tradition anticipated. The second is information technology. Conduct that was once private is now visible, and durable, to outsiders. The third is stakeholder activism. Investors, employees and consumers are willing to act on moral preferences. Which converts reputation from a soft idea into a measurable asset. The cumulative effect is the part worth holding on to. Ethical reasoning was an optional supplement to managerial competence. It is now a component of it.
Definition
Legal and Ethical Are Different Tests
So what is business ethics, precisely? It is the systematic study of moral standards, as they apply to commercial activity. The question is not what the law permits, and not what pays. It is what is right. That distinction matters, because law and ethics overlap without being identical. Many actions are entirely legal and still ethically questionable. Some are illegal and still defensible on moral grounds. So the ethical evaluation of conduct is a separate exercise from the legal one. Three features then separate business ethics from personal morality. First, decisions are made by collectives - firms, teams, boards - which distributes moral responsibility among participants. Second, business runs under competition, profit and time pressure, which complicates the calm deliberation moral reasoning requires. Third, the consequences are large, indirect and dispersed. A sourcing decision may affect workers a manager has never met, on a continent the customers never visit.
Three Arguments
Why the Subject Earns Its Place
There are three separate arguments for taking this seriously, and they are worth keeping apart. The instrumental argument says ethical conduct produces returns over the long term. Reputation, trust and legitimacy become customer loyalty, employee retention, and a lighter regulatory burden. The deontological argument says consequences are beside the point. Respect for persons, honesty and fairness are obligations of any organisation, profitable or not. The systemic argument is the least familiar, and arguably the strongest. Markets themselves depend on a substrate of ethical behaviour. Strip out honest dealing, enforceable contracts and informed consent. What remains is so costly to verify that most commercial activity simply stops happening. These three do not substitute for one another. They complement each other, and land in the same place. Serious ethical engagement is not a luxury profitable firms can afford. It is a condition of the activity.
Five Lenses
One Decision, Five Focal Questions
The Western tradition has produced several enduring frameworks for moral reasoning. Each illuminates something about ethical life that the others underplay. The temptation is to pick the one that suits you, and discard the others. Resist that. The skilled manager runs the same decision past all five. Utilitarianism asks about aggregate consequences. Deontology asks about rules and rights. Virtue ethics asks about character. Justice frameworks ask whether the distribution is fair. And stakeholder theory asks whose interests count in the first place. Where the five converge, the case is relatively easy, and you can move quickly. Where they diverge, the difficulty is real, and that divergence is a signal rather than a nuisance.
Outcomes Or Rules
Utilitarianism Against Deontology
Take the two oldest lenses, and notice that they genuinely disagree. Utilitarianism was articulated by Jeremy Bentham, and refined by John Stuart Mill. The rightness of an action depends on its consequences. Specifically, on the balance of benefit and harm across everyone affected. The right action is the one producing the greatest aggregate welfare. Applied to business, that means counting consequences for employees, customers, suppliers, communities and future generations. Its limitation is sharp. It can justify treating an individual badly, when the aggregate improves. And it needs comparisons of welfare across people that resist precise measurement. Deontology, developed most rigorously by Immanuel Kant, rejects the premise outright. Some actions are right or wrong in themselves, whatever the consequences turn out to be. Act only on a rule you could will to be universal, and never treat a person merely as a means. Its limitation is that universal rules conflict, and strict adherence produces outcomes almost anyone would call unreasonable. Neither framework has defeated the other. That is the honest state of the argument.
Character And Fairness
Three Lenses That Change the Question
Three further lenses change the question again. Virtue ethics has roots in Aristotle, and was revived by Alasdair MacIntyre and others. It shifts attention away from rules and consequences, and onto character. The right action is the one a person of good character would take. Honesty, courage, fairness, prudence. So the question is not only what should I do here. It is also, what kind of manager, and what kind of organisation, am I becoming. Its limitation is that the virtues themselves are contested across cultures. And it gives little guidance where two virtuous people would reasonably disagree. Justice and rights frameworks, drawing on John Rawls, ask a distributive question instead. Is the spread of benefits and burdens fair, and does it respect basic rights? Rawls asks you to choose principles from behind a veil of ignorance, not knowing your eventual position. Stakeholder theory, from Edward Freeman in the nineteen-eighties, widens the scope instead. The firm owes obligations to every group materially affected by its activities. It does not say how to weigh those claims when they collide, only that the question must be asked.
Side By Side
What Each Lens Sees, and Misses
It helps to see the five side by side, with their weaknesses attached. Utilitarianism asks which action produces the greatest aggregate good. Strong on consequences. Capable of justifying harm to an individual. Deontology asks which action respects rules and rights, whatever follows. Strong protection of the individual, and prone to conflicting rules, and to rigidity. Virtue ethics asks what a person of good character would do. Strong on character formation. Weak where cultures disagree about which virtues count. Justice asks whether the distribution is fair, and is undercut by disagreement about the principles themselves. Stakeholder theory is the most inclusive in scope, and the least specific about weighting. Each column of weakness is another framework's strength. That is the whole argument for using all five.
In Practice
Six Steps, In This Order
Frameworks, however illuminating, do not resolve cases by themselves. A widely used process forces the right questions in the right order. Step one. Identify the ethical issue. Most problems arrive framed as financial or operational, with the moral dimension obscured. Naming the stakeholders, the interests at stake, and the conflicting obligations is itself much of the work. Step two. Gather the facts. Most apparent dilemmas dissolve under accurate information. The ones that survive can only be addressed once the factual basis is clear. Step three. Identify the affected parties, including those not represented in the room. Step four. Apply each framework in turn, and see whether they agree. Step five. Identify the options, including the ones the initial framing suppressed. Step six. Choose and act, treating the choice as provisional and open to revision. Then there is the part managers resent. Documenting the reasoning. Organisations that require managers to record ethical reasoning report fewer recurring failures. Not because paperwork prevents a bad decision, but because it surfaces flawed reasoning in time to correct it.
Two Documents
A Code of Ethics Is Not a Code of Conduct
Abstract commitments become operational through formal codes, and there are two different documents here. A code of ethics articulates the values and principles that guide the organisation. Honesty, integrity, respect, accountability, sustainability. Deliberately general. A code of conduct specifies expected behaviour in concrete situations. Gifts and entertainment. Conflicts of interest. Harassment. Accurate record-keeping. The two documents do different work. The code of ethics gives the organisation its moral voice. The code of conduct gives employees usable rules for the situations they actually meet. Decades of research have identified when codes work, and the conditions are demanding. They must be genuinely consulted on, and communicated repeatedly rather than buried in an induction pack. Reinforced by what leaders visibly do, and supported by reporting channels with no risk of retaliation. And enforced consistently, across every level of seniority. Here is the sharp version. A code senior managers conspicuously breach is worse than no code at all. It teaches the whole workforce that the document is theatre.
Patterns
The Same Failures Recur Because the Conditions Do
Empirical studies keep finding the same short list of issues, across industries and geographies. Not because individual managers are uniquely corrupt, but because the structural conditions predictably generate them. Corruption and bribery arise wherever discretionary power, opaque procedures and significant rents coincide. Conflicts of interest arise wherever decision-makers hold personal stakes in their official decisions. Misrepresentation arises wherever information asymmetry makes deception profitable and detection difficult. Discrimination arises wherever discretionary judgements are made under biases that favour the familiar. Whistleblowing dilemmas arise where loyalty to colleagues and loyalty to the truth pull apart. And safety shortcuts arise where compliance costs fall on the firm, while the benefits diffuse outward. Read those again and notice the form. Each names a condition, not a personality. That does not exonerate the people who participate. Moral agency remains. But it tells you where remedial effort belongs. Reduce discretion, increase transparency, separate decisions from interests. Screening individuals for character is one lever. It is rarely the strongest one on its own.
Consolidate
Four Pillars, and What Happens When One Falls
Pull it together. Ethical conduct is the product of reinforcing elements, not one intervention. The first is clear standards. Codes genuinely developed, covering principles and behaviours. The second is competent communication. Repeated, contextual, two-way conversation about real questions. An annual recertification exercise does not qualify. The third is dependable channels. Protected routes for raising a concern, with credible follow-through. The fourth is consistent enforcement. The same standards, regardless of who is involved. A short case makes it concrete. A global engineering firm, in over forty countries, inherited a thin legalistic code. Staff regarded it as a defensive document for the legal department. The new chief executive rebuilt it over a six-month consultation, and it came out shorter. She then spent eighteen months visiting major sites, to discuss it and hear concerns. The first significant case under the new code involved a senior executive, handled by the ordinary procedure. Over five years, complaints rose first, which is the channel working, then stabilised above the old baseline. Where the four pillars reinforce each other, ethical reasoning becomes routine rather than heroic. Where one collapses, the rest follow. Employees infer the real rules from what leaders tolerate, and punish.
About Foundations of Leadership at UPI Study
Foundations of Leadership (Business 205) is a self-paced online course of 90 video lessons in 12 chapters, from the roots of leadership theory and the trait, situational and transformational approaches to power, decision-making, communication, teams, conflict, diversity and global leadership. It carries a NCCRS credit recommendation for 3 semester credits.
Every lesson transcript is free on pages like this one, and the videos are free with a free UPI Study account. Enrolling adds a practice quiz after each lesson, the graded work and final exam that earn the credit, lifetime access, and an official transcript on completion. UPI Study has helped over 130,000 students with college credits. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.
Enroll now → Course details Download the syllabus All Business courses Every course with PRO →
Compare: Management and leadership courses · Foundations of Leadership vs Leadership and OB
Why take it here
Why students take Foundations of Leadership with UPI Study
Where the credit goes
Universities that work with NCCRS
Foundations of Leadership carries a NCCRS credit recommendation. These universities work with NCCRS; some are UPI Study's signed partners. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.
Thomas Edison State UniversitySigned partner
University of the PeopleSigned partner
Charter Oak State CollegeSigned partner
Strayer UniversitySigned partner
Columbia Southern UniversitySigned partner
Indiana TechSigned partner
Penn StateWorks with NCCRS
Southern New Hampshire UniversityWorks with NCCRS
SUNYWorks with NCCRS
+many more cooperating universitiesFind my college →Find my college → Not listed? Ask Athena in the corner of this page, or book a 15-minute call.
FAQ
Questions students ask us
About Ethics in Modern Business: Principles, Frameworks and Codes
What is business ethics?
What is the difference between utilitarianism and deontology in business ethics?
What is the difference between a code of ethics and a code of conduct?
What are the steps of ethical decision-making in business?
About the Foundations of Leadership course
How many college credits is Foundations of Leadership?
How much does Foundations of Leadership cost and what is included?
Which universities accept UPI Study credits?
How long does Foundations of Leadership take?
How are the exams done?
How do my credits reach my college?
Ready for the full course? Earn 3 credits in Foundations of Leadership.
90 video lessons, a quiz after each one, and the graded work that earns the credit. Recommended for credit by NCCRS.
3 credits · NCCRSEnroll →