MODULE 1

Good Governance and Social Responsibility

4th Year – MM, FM, HRM

LEARNING OBJECTIVES

The learners shall be able to:

Differentiate the three categories of economic activities;

Illustrate the important features and characteristics of business as an economic activity;

Demonstrate the importance of ethics in business;

Evaluate the relationship between ethics and business;

Justify the morality of profit; and

Critiques ethics and morality in business.

INTRODUCTION

All business organizations and the entire society need ethics. In all aspects and operations of an
organizations, ethics is a must to be implemented. It is expected that organizations shall be able to attain
a long-term efficiency if ethics could be implemented successfully. It is quite a regret that numerous
organizations are not able to execute ethics because of human nature and mismanagement.

Ethics is very beneficial to business organizations if properly implemented. With successful

execution of ethics, organizations are able to attain better quality-performance. This is the result of
attracting and retaining highly qualified employees and satisfying stakeholders such as customers,
suppliers, and investors. Yet implementing successfully ethics in the organization requires a lot of time
and effort.

DISCUSSIONS

NATURE OF BUSINESS

According to Urwick and Hunt, “Business is any enterprise which makes, distributes or provides
any service which other members of the community need and are willing to pay for it”.

By its nature, man has unappeasable and innumerous wants. In order to satisfy his unquenchable
needs he works harder to maximize the use of limited resources around him. Making full use of meager
resources to the best satisfaction of human wants is known as economic activity.

Economic activities are those undertaken by man to earn income, money, and wealth for his life
and to secure greatest satisfaction of wants with inadequate and limited means. For this intention, each
person may pursue an activity based on his interest, capacity, knowledge and training. Economic activities
are classified therefore into three categories, namely:

PROFESSION – profession is an occupation carried on by professional people like doctors, lawyers,

engineers, teachers and others. They provide specialized services in return for fees. In order to become a
professional, a man requires specialized and professional qualification. For instance, a doctor needs
specialized knowledge in medicine; while a lawyer needs a degree in law, and so on.

EMPLOYMENT – employment is a type of occupation under which one person provides his services,
physical or mental to someone else in return for whom he gets salary or wage. The person who employs
is called employer and the person who is employed is called employee or worker.

3. Business – Business is an economic activity concerned with production and distribution of goods and
services with the aim of earning profit. It includes all those activities which are directly or indirectly
concerned with production, purchase and sale of goods and services. So the production, marketing,
advertising, warehousing, insurance, banking, and others are all business activities.

Business as an economic activity has very important features and characteristics, which are the
following:

1. Production or acquisition of goods – business is an economic activity of production and distribution of

goods and services. Every business whether small or large scale deals with goods and services. The goods
may be produced, manufactured or procured and then then to supply for a cost to those who are in need
of them. The goods may either be consumers’ goods (cloth, books, electronics appliances, medicine and
others) or producer goods (machinery, tools, and so on) or services (courier or transport services).

2. Generates employment – business operates employment in various sectors of the society. It is also an
activity that creates utilities to satisfy human needs and wants. The society gets income from businesses
that bring industrial and economic growth and development of the country.

3. Continuous process – business is not a single time operation. It is a recurring process of production and
distribution of goods and services. Recurrence of dealing is a must to be termed as a business. A business
must be done regularly in order to grow and achieved expected returns. A business should also constantly
engaged in research and developmental activities to achieve competitive advantage.

A constant improvement strategy helps to boost profitably of the business organization.

4. Profit is the basic motive – profit is essential for survival, growth and expansion of the business. Behind
any business, the stimulus and assurance to continue survival of the business is profit. Profit is a sign of
success and failure of business. The principal aim of a business is generally to gain the highest possible
level of profit from the manufacture and sale of goods and services. It is a return on investment or the
compensation of all those individuals engaged in a particular business. An efficient businessman tries to
double and redouble his effort and creates plans to serve the business community to gain more profit.

5. Risk or uncertainty of future – it is a reality that future is risky and uncertain. A business focuses on the
future; hence there is always risk and uncertainty while carrying on its operations. Risk and uncertainty is
always related with every business. The estimate and management of the risk is essential to guarantee
the success of a business organization. It is a risk and uncertainty which every businessman considers
when he gets involve in a business activity.
6. Creative and dynamic – modern business organizations have to produce creative ideas, methods and
ideas for the production and distribution of goods and services. These organizations should come out with
bright, latest and ingenious things and ways. With the dynamic and changing economic, social and
technological environment, a businessman should be innovative. In order to satisfy the increasing and
ever shifting needs of customers, a business must always come out with the products and services.

7. Customer satisfaction – the phase of business has changed and now adopts a consumer-oriented
approach. Today, the vital aim of all economic activities is customer satisfaction. Through providing quality
product at a reasonable price, a modern business is able to satisfy its customers. Profit is just secondary
to customer satisfaction for a good businessman. When they get real value for their purchase, customers
are satisfied. Hence, customers keep on coming back and make a lot of purchases.

8. Social activity – business is also socio-economic activity. Business and society are mutually
interdependent. Contemporary businesses operate with social responsibility in mind towards the society.
In turn, to properly function they need the assistance of different social groups such investors, employees,
customers, creditors and others by making goods and services accessible to different segments of the
society. Indeed, businesses perform a vital social role and satisfy social needs.

9. Government control – the government has some control over the operations of business organizations.
Rules and regulations passed by the government are required to be followed by businesses. The
government makes certain that businesses operate for social good. Through strict control and effective
supervision of the rules and laws, the government is able to direct businesses to provide satisfying good
products and services to consumers.

10. Optimum utilization of resources – the inadequate resources are brought into optimum use by
businesses. This is for the intention of satisfying the needs and wants of the consumers. Both the material
and non-material resources are utilized fully to attain economic progress of a country.

THE IMPORTANCE OF ETHICS IN BUSINESS

Ethics needs to be practiced to make sense for a business organization. Everyone wants
businesses that are fair, clean and beneficial to the society. Certainly, for this intention to happen,
business organization should be ethical and follow rules while they are engaging in competition for the
benefit of the consumer, the society and organization itself. Ethics is very important for these reasons,
namely:

1. Satisfying basic needs – the basic human needs is being fair, honest and ethical. Each employee wants
to remain himself and to work hard for an organization that is fair and ethical in all its practices.

2. Building credibility – an ethical business organization that is propelled by moral values is highly
respected in the society. Although with less or without information about the organization still this
perception remains for a business having good corporate governance and social responsibility programs.
This view is held everywhere even by those who are not yet familiar with what business the organization
is into.

3. Connecting leaders and employees – an organization driven by moral values is well regarded by its
employees too. They are the common string that binds the employees and the decision-makers together
on a general strand. Although, to align behaviors would take time and big effort to do before the
realization of one common goal or mission.

4. Enhancing decision making – the future of an organization is the total amount of all its decision
throughout its lifetime. Hence, decision must be driven by moral values. It is a fact that competition is
always present in the world of business. Emerging from a stiff competition through wiping out competitors
and creating a monopoly in the market is not a good decisions of an ethical business organization.

5. Continuing gains – Ethical businesses guided by moral values are profitable for a long period of time.
Possibly it may seem to lose money but that would only be on a short-term basis. There were numerous
businesses that have been observed in the threshold of decline, yet still operate ethically and were later
able to overcome. Some companies failed to do well at some point, yet are now doing good because they
remained to be ethical despite some failures.

THE RELATIONSHIP BETWEEN ETHICS AND BUSINESS

Ethics has a big role in the operations of a business. A bad business could be the consequence of
unethical business practices. While effective practices could be the outcomes of good and valuable ethical
practices. This simply proves that ethics and business really go hand and hand. Indeed, ethics must have
a place in every business organization.

Ethics should actually start from the time the goals and intentions are being framed at the
beginning of the venture. So that once a business is launched, ethics already becomes a part of its internal
infrastructure. Ethics should be part of the management structure of any business. It must be a
component of the core rules of business operation for an effective management. In every relationship
inside the business, an organization needs ethics as an foundation such as that of employers and
employees, business itself and its partners and the organization and its customers. For instance, an
employer must have its moral obligation to his employees in the form of respect and loyalty, just and fair
wage and good working condition.

There must always be the motive to contribute some social benefits despite the primary objective
of a business to produce profit. A business needs to satisfy a need or a want in order to offer something
of value to its customers. Indeed, in this case a business must consider social needs and should involve
ethics in doing so. Obviously, while espousing ethics, a business must not forget its primary objective
which is generating profits. Ethics must be regarded as a support and not a hinder in making money for
the business. Being hand and hand, both profit motive and contribution motive should go along well.
Businesses that demonstrate and support strong corporate ethics often turn to be profitable in the long
run.

In today’s highly competitive environment, there is a pressure to stay profitable for the sake of
good return of investments to please stakeholders. Often this pressure however, leads to unethical
decisions just to deliver positive results. When a decision-maker justifies such act knowing it is wrong, this
may develop into becoming part of the organizational structure sooner or later. Eventually, subordinates
will see this as an example and such short of moral judgment will multiply.

The society nowadays desires immediate satisfaction and people look forward to instant
outcomes. This could possibly be the main explanation on the unethical practices of some businesses.
Certainly, bad business practices when tolerated may cultivate unsound moral philosophies which would
decline moral acts. When this happen defective and faulty products, invalidated firing of employees, and
misrepresentations of products to consumers will grow to be common in the business environment.

There must be no basis why a business organization cannot create ethical decisions and cannot
act ethically while still making profit. Deceitful and dishonesty do not add value to a business and may
also affects its operation negatively. Employees and good reputation are two vital assets of a company
that need to be enhanced by encouraging a morally ethical environment for both employees and
customers.

Trust and confidence coming from customers can serve a lot of benefits to the business company.
Once a business becomes popular as a company that treats everyone fairly, with expertise and very
knowledgeable staff about the company, more customers would be attracted to buy because of such
reputation of honesty and integrity. The large network that would be created will result to a lot of
economic benefits for the business. In this case, the company should continue to promote ethically good
behavior in the workplace as its primary objective for its best interest.

Indeed a positive image of a company would mean a higher profits and a lot of better services
intended to its customers. In order to be an effective company, ethics and business should not be
separated. In the long run it would be a win-win situation for everyone if a strong ethical policy is truly
implemented. These days of highly competitive business environment, the best way to promote success
on all levels is integrating ethics within the business operations.

THE MORALITY OF PROFIT

In order to understand if gaining profit is really advantageous and desirable, one must know the
goals of a life well-lived. Every individual lives with double-purpose intentions, which are survival and
flourishing. The goal of perpetuating ones biological being and averting to experience poverty, downfall
and death is known as survival. While flourishing is being able to control and manage material reality and
take advantage of more elements for the sense of self-love so as to un-stick one’s self from a present
situation and make a start to grow as a human being.

In life every individual will obtain some benefits from material reality only if he acts and utilizes
his reasoning. For a person to act in the ways he desires there will be expenses that he needs to spend.
When a man’s gains are equal to his expenses, that means a break-even for him, and he survived. Simply,
this means he is no worse off neither is he better off than he was when he started. When a man wants to
flourish, his gains should be greater than his expenses. Hence, it necessitates for him to produce a profit.

The only way to flourish is to gain profit. In order to control and manage material reality, a person
must not lose any assets or just have a break-even. Profits come in a lot of different shapes. One may
grow material reality from intellectual profit or gain of knowledge. A person may also obtain profits from
technical means or gains of skill, and material profits or gains of property. A gain in health and fitness is
also known as physiological profits. A gain in valuable relationships is called social profits. A gain of money
is termed as monetary profits. Each person values these types of profits in a different degree depending
on the ways in which that individual desires to flourish.

Money being the medium of exchange is always use in trading a broad variety of goods and
services very conveniently. In order for an individual to gain knowledge and skills, he needs money to
purchase books or pay to his tuition fee in school. Money is also use to procure gym stuff if a person
desires to enhance his physical health and vigor. Most people purchase gift items especially during special
occasions to preserve positive social relations. Obviously, some people invest their money into obtaining
valuable assets to make more money. Money indeed performs a big role in attaining the flourishing goal
in life.

What Makes Profits Unethical

The profit motive is indispensable particularly to businesses because it is their primary goals.
Businesses have the option to grow and maximize profits either ethically or unethically. The choice of
unethical business practices such as deceiving customers through dishonest advertising, cutting down
incentives of employees, selling low quality of products, or damaging the natural environment may result
to tarnish brand reputation or disloyalty among customers.

EMPLOYEES

Reducing or even not providing the required benefits due to employees to minimize costs is one
of the most common unethical practices in companies. In almost all industries, the largest percentage of
expense concerns payroll. This bad practice of getting rid of benefits has become an ethical issue that
results to poor morale among employees in the workplace. In small businesses that have only few
employees, this could lead to destructive outcomes. This strategy is fast, established and useful for many
companies though very unethical in the eyes of the public. Cutting costs at the expense of employee may
move a business down to risk route toward bankruptcy.

MARKETING

A company’ marketing may contribute a lot to its generating of profits. A strong marketing
strategy may increase brand awareness, pull customers towards the company and eventually produce
profits. In the field of marketing the intention of maximizing profits often times leads companies into an
ethical dilemma of choosing the right from wrong decisions. Some ethical issues in marketing includes
sexy advertisement to attract male customers particularly in liquor and wine products, advertisements
targeting young people even if they may look cute and innocent enough and making use of violence in
presenting advertisements for a product or service.

ENVIROMENTAL

The process of producing some goods and the delivery of some services are sometimes done using
unethical environmental practices. Often, companies wanted to generate profits to the detriment of the
environment. Some of these unethical environmental practices include increasing pollutants, water
supply contamination and deforestation. The common reason for these unethical practices is cost. It is
highly cost for companies to positively impact the environment, especially for small businesses. There is
a need for a lot of extra cash to continuously operate much safer factory or plant. Producing pollutants
may seem to be an advantage and less costly although it may bring a negative impact to the environment.

QUALITY

Producing goods and providing services especially premium ones are costly. This is possibly the
rationale of companies in trimming down the quality of goods by using substandard materials but still
selling at the same price to gain more profits. However, this kind of practice crosses the boundary towards
an unethical business practice. The practice of maximizing profit at the cost of quality may stain the
company’s brand name and reputation. Thus, this unethical practice leads to the loss of the respect, trust
and loyalty of customers. It will be also have vital consequences on the slow growth and reduced revenue
of both small and big businesses.

ETHICS AND MORALITY IN BUSINESS

It is basically ethics that decides whether certain actions, conducts and behavior are right or
wrong, good or bad, moral or immoral and just or unjust. In general, ethics creates the rules and standards
that direct the proper behavior of both individuals and groups. It considers honesty of primary intention,
possible would be harm and harmony with customary values and rules.

On the other hand, morals are judgments, standards and rules of right conduct in the society.
Morals provide direction tom people on acceptable behavior regarding basic values. Business owner or
leader can draw effective decisions and strategies using his understanding of values, ethics and morals
together with ethical principles. The motivation to include ethical principles into the decisions making
formation shows willingness in encouraging equality and avoiding possible ethical issues to happen.

FEATURES OF BUSINESS IN ETHICS

Business ethics is a form of applied ethics, which studies ethical principles, morals and problems
that happen in the business environment. It is nothing but the integration of day to day morals and ethical
norms to business and applies to all types of business. Here are the features of business ethics, namely:

1. Code of conduct – business ethics is a code of conduct. It tells what to do and what not to do for the
welfare of the society. It is the code of conduct which businessmen should follow while conducting their
normal business activities.

2. Based on moral and social values – business ethics is based on well-accepted moral and social values.
It contains moral and social principles of conduct for businessmen. This includes self-control, consumer
protection and welfare, service to society, fair treatment to social groups, and not to exploit others.

3. Give protection to social groups – business ethics give protection to different social groups such as
consumers, employees, small businessmen, government, shareholders, creditors, and other stakeholders.

4. Provides basic framework – business ethics provide a basic framework for conducting business. It
suggest legal, social, moral, economic and cultural limits within which business has to be operated.
Business must be conducted within these limits. It suggests what is good and what is bad in business.

5. Voluntary acceptance for enforcement – business ethics must be voluntary. The businessmen must
accept business ethics on their own. Business ethics must be like self-discipline. It must not be enforced
by law. It should come from within the businessmen.

6. Requires education and guidance – businessmen must be given proper education and guidance before
introducing business ethics. The businessmen must be motivated to follow ethical business practices. They
must be informed about the advantages of using business ethics. Trade Associations and Chambers of
Commerce must also play an active role in this matter.

7. Relative Team – business ethics is a relative term – That is, it changes from one business to another. It
also changes from one country to another. What is considered as good in one country may be taboo in
another country.
8. Not against profit making – business ethics is not against fair profit making. However, it is against
profiteering by cheating and exploiting consumers, employees or investors. It supports expansion of
business activities but by fair means and not through illegal activities or corrupt practices.

SOURCES OF BUSINESS ETHICS

Basically, ethics in business is affected by three important sources which are culture, religion and
laws of the state. Thus, there are no uniform or totally the same standards across the globe. These three
factors places influence on humans in different degrees that eventually mirrors the ethics of the
organizations. These sources are as follows:

RELIGION

Religion is one of the oldest foundations of ethical standards. There are numerous religions which
exist across the whole world. Every religion gives an expression of what is wrong and right in business and
other walks of life. It is believed that ethics is a sign of the Divine and so it draws a line between the good
and the bad in the society.

CULTURE

The other source of business ethics is culture. Culture is the set of significant understandings that
member of a community share in common that are transferred from one generation to another. It also
refers to the pattern of developed reflected in a society’s pattern of knowledge, ideology, values, laws,
social norms and everyday rituals differs from society to society. It is the culture that primarily determines
what is wrong and what is right and defines certain behavior as acceptable and others as unacceptable.

Culture facilitates the generation of commitment to something larger than one’s individual self-
interest. Culture encourages the members of the organizations to give priority to organizational goals over
and above their personal interest. Culture also serves as a sense making and control mechanism that
guides and shapes the attitudes and behavior of people.

LAW

Laws are procedure and code of conduct that are laid down by the legal system of the state. They
are meant to guide human behavior within the social fabric. The major problem with the law is that all
the ethical expectations cannot be covered by the law and specially with ever changing outer environment
the law keeps on changing but often fails to keep pace. In business, complying with the rule of law is taken
as ethical behavior, but organizations often break laws by evading taxes, compromising on quality, service
norms and so on.

The legal system of any country, guide the human behavior in society. Whatever ethics the law
defines is binding on the society. The society expects the business to abide by the law. Although it is
expected that every business should be law abiding, seldom do the businesses adhere to the rules and
regulations. Law breaking in business is common such as tax evasion, hoarding, adulteration, poor quality
and high priced products, etc.
XYLEE ANNE A. DE CASTRO,LLB

INSTRUCTOR

MODULE 2

Good Governance and Social Responsibility

4th Year – MM, FM, HRM

LEARNING OBJECTIVES

The Learners shall be able to:

Explain the three types of normative ethical theories;

Discuss Kohlberg’s viewpoint on the six stages of moral reasoning;

Elaborate the rules suggested by Machiavelli which could guide a leader;

Interpret the utilitarian principle of Bentham;

Evaluate the different categorical imperatives of Kant;

Support the two important principles about justice of Rawls;

Appraise the legal positivism of Hobbes;

Assess the divine command theory; and

Defend the ethical egoism of Rand.

TOPIC

Normative Ethical Theories in Business Decision-Making

INTRODUCTION

Certainly, business leaders make decisions that must be ethically significant everyday. Practical
speaking, ethics works its way into business through considering moral principles in formulating decisions
and putting said decision into actions.

The study of ethical action is known as normative ethics. Basically, normative ethics focuses on a
general theory that tells how people ought to act. It tries to study standards of determining the rightness
and wrongness of actions.

The Nature of Normative Ethics

 Normative ethics is the attempt to provide a general theory that would guide people how they
ought to live and act. For any human action, it is morally interesting to identify three elements that actually
correspond to the three types of normative theory. Every human action involves an agent who performs,
some actions that has particular consequences. These three types of normative ethical theories are virtue,
deontological, and consequentialist, each stressing one of these elements.

Virtue theory obtains judgments of agents or persons as most essential. On the other hand,
deontological theory takes judgments of actions as most vital. It is consequentialist theory that obtains
judgments of the possible consequences of an action as more indispensable.

VIRTUE ETHICS

This virtue theory focuses on the moral character of the agent as depicting an ideal of human
character. Meaning it is person-based-based that looks at the virtue or moral character of the person
carrying out an action. According to virtue theory, individuals should have certain character traits such as
courage, generosity, compassion and other goods characters that must be evident in their actions. People
thus need to act in manners that show the virtues, although it might be misperceived as bad or lead to
detrimental results.

Virtue ethics give guidance as to the kind of characteristics and behaviors a good person will try
to attain. In that manner, virtue ethics is concern with the totality of an individual’s life, before some
specific actions or events. This theory also suggests that the approach to make a good society is to assist
its members to be good people, instead of the use laws and punishments to stop and discourage bad
actions. Among the principles that virtue ethics teaches are:

1. If an action is being done by a virtuous person in the same situations, then it is right;

2. A person who takes action virtuously is a virtuous person;

3. Only when a person possess and live the virtues that he acts virtuously; and

4. A virtue is a moral attribute that a person requires to live soundly;

Deontology

Deontological theory on the other hand centers on the act being done. Based on this theory, there
are specific types of acts that are intrinsically good or bad or good or bad by nature. These particulars act
should or should not be done without any regard to the consequences. Thus, the basic ethical task for
persons is one of doing the right thing or more commonly avoiding doing the wrong thing using a of moral
principles or moral rules. Deontological theory emphasizes the centrality of rules.

The character most essential in a deontological view is conscientiousness. It is conscientiousness

that makes a person abide with rules carefully despite several temptations not to follow in some cases.
Conscientiousness in itself is not significant but it is needed to make certain that people follow rules and
thus do things right. Basically, the Ten Commandments although in religious context provide a model of a
set of rules of conduct that need to be followed.

Consequentialism
 Consequentialism is the other approach to normative ethics. Consequentialism is an ethical
theory that evaluates whether or not something is right by what its consequences are. For instance, most
people would agree that lying is wrong. But if telling a lie may help protect a person’s life,
consequentialism says it is the right and best thing to do.

Utilitarianism and hedonism are the two examples of consequentialism. Utilitarianism holds that
people have to act always in the manner that produces the greatest consequences. It does not concern
on what those acts are for as long as the end justifies the means. All that is important for ethics is building
the world a place to live in. Hedonism, on the other hand, is a philosophy of pleasure that says something
is “good” if the consequence produces pleasure or avoids pain. It means doing whatever brings the
greatest amount of pleasure, regardless of any other effects.

There are two types of consequentialist theories which are act consequentialism and rule
consequentialism. Act Consequentialism needs an agents to carry out the particular action that in a
particular situation is the most possible to maximize goods consequences. Rule Consequentialism in
contrast, obliges agents to pursue those moral rules the performance of which will maximize good
outcomes.

In consequentialism the goodness of a thing depends on whether it is instrumental or intrinsic.

Instrumental goodness brings about intrinsically good things. Money is a great example this. Money buys
people things they like and is good because its get them what they want. Intrinsic good is something
valuable because it is good-in-itself. Honesty for instance may be considered as instrumentally good by
such a theory given that honesty is possible to add to maximizing human happiness. Intrinsically, honesty
is good in itself.

Kohlberg’s Stages of Moral Development

A psychologist by the name of Lawrence Kohlberg modified and expanded the previous work of
Jean Piaget to form a theory that provided details on how children develop moral reasoning. Kohlberg
believed that moral development follows a sequence of stages. The Heinz dilemma which he created that
discusses the idea of obeying the law versus saving a life is one of the best acknowledge moral
predicaments. According to Kohlberg, the manner a person reason out about a dilemma determines his
positive moral development.

In Kohlberg’s viewpoint there are six stages that an individual may go through in achieving the
highest level of moral reasoning. Business owners and managers may gain a lot from Kolhbergs theory
through knowing how key stakeholders within organization and its leadership interact at various stages
of growth. Having knowledge of these stages can help businesses in formulating meaningful human
resources policies and beneficial incentive systems. In addition, owners and managers may be able to
appreciate younger employees behavior and way of decision-making.

Level 1 – Preconventional Morality

The preconventional level of moral development addresses the initial reactions that children are
likely to have to their surroundings and relationships. At this stage of the earliest stage of moral
development, children see rules as fixed and absolute.
 When applied to business, the preconventional level explains the reactions of many employees
when they initially join an organization. There is often uneasiness about satisfying the boss and desire to
perform work industriously and without much upset.

Level 2 – Conventional Morality

Kohlberg says that as a person mature morally, he goes into the conventional stages of good
interpersonal relationships and sense of maintaining social order. This normally happens in the teenage
years, when the person will begin to develop more strong relationship with others that go outside self-
service. The teenager will want to accept the rules of authority figures not to reward, but because he sees
it as a way to maintain to order and secure justice. Obedience to rules and conventions is somewhat strict
during these stages, and a rule’s correctness or fairness is rarely questioned.

In business, this conventional stage of morality is observed as employees become more relaxed
working within the organization and with their co-workers and supervisors. While the employees will
preferably still would like to be productive with his time, his focus begins to shift to the better good of the
company, quite the reverse to entirely selfish motives.

Level 3 – Postconventional Morality

Kohlberg’s post conventional morality is defined in terms of more abstract principles and values.
It involves an acknowledgment of the social contract and of universal ethical principles. A social contract
is the idea that people have to renounce certain rights in return for other rights or for protection. This is
the recognition that freedom of speech has limitations, that certain laws are designed for the greater good
and that ethical principles work in combination to make better the lives of society’s members.

In business setting, the post conventional stage is likely to be seen in employees who have been
with the company for a long time. These employees may have been promoted to management positions
and are dedicated to secure a sense of rights and responsibilities among their subordinates.

THE MACHIAVELLIAN PRINCIPLES

In the business setting a true “Machiavellian” entrepreneur or executive is an innovator who could
create new and better ways of producing and distributing products and services. In Machiavelli’s
perspective, this leader might be exempted, not justified in violating the principles of honesty only if it is
absolutely necessary to realize a great act of innovation for the benefit a great number of human beings.

Better to be feared than loved if one cannot be both

Gradual reward and immediate punishment

the lion and the fox

Envy and Dive

The end justifies the means

Cycle management forms

Promote criticism and frankness

Always make a choice

Don’t micromanage, but center on one goal

Let passion be the basis of one’s business

Capture the zeitgeist

Make friends and avoid enemies

Be cautious of “yes” people

Deal with business threats promptly

Learn from the greats

UTILITARIANISM OF JEREMY BENTHAM

Four Elements of Utilitarianism in Business

Consequentialism

It means understanding the wrongness or rightness of action is based on the actions themselves.
Businesses apply the idea of consequentialism in their operations, though it challenges morality and ethics
that are being practiced sometimes. Employee are encouraged to act as they want provided the results
would be advantageous to the company. Profit is primary goal of all businesses and sometimes immoral,
unethical or illegal means are done just to attain this goal.

2. Welfarism

The next element refers to understanding that the wrongness or rightness of operations based on
how society’s idea of welfare. Simply actions are good when they provide the greatest benefit for the
majority members of the society. In the area of business, the management may give wages and benefits
increase for the well being and contentment of their employees. This is a positive application of
utilitarianism that may strongly affect the work performance of employees.

3. Individualism

It holds that each persons, as a human being, wants to experience happiness, thus, will employ
actions that take advantage of utility. With this reality, businesses shall act in ways that bring them
happiness. Increased profits, improved customer satisfaction levels, among others are some examples
that may bring happiness for businesses. Certainly, businesses will become successful if employees are
contented and pleased individually.

4. Aggregation
 Is the outlook that the wrongness or rightness of actions relies on their talent to average the
benefits brought to all individuals. This element of utilitarianism suggests that the results of an action
must bring happiness both to the individual and the community that surrounds him. A business needs to
practice increasing profits simultaneous to providing the best interest of its stakeholders such as its
customers, suppliers, employees, the community where it is located and the government. Selling premium
quality and harmless product, for instance grant an enhanced intrinsic value to the business at the same
time satisfying the needs and wants of its customers.

The price of greatness is responsibility.

XYLEE ANNE A. DE CASTRO,LLB

INSTRUCTOR