Business Ethics

Ethics are individual standards or moral values regarding what is right and wrong or good and bad. In a business context, ethics govern how managers and employees make decisions — especially when rules and laws don’t provide clear guidance.

Ethics are distinct from CorporateSocialResponsibility: ethics operate at the individual level; CSR operates at the organizational level. An individual can act ethically while their company behaves irresponsibly — and vice versa.

Where Personal Ethics Come From

• Family, culture, religion — foundational values instilled early
• Education and peers — exposure to different moral frameworks and norms
• Experience — hardship, role models, past mistakes

Because ethics are individually formed, two managers at the same firm can face the same decision and reason differently about it. This is why organizations write codes of ethics — to create shared standards where personal values might diverge.

Managerial Ethics

Managerial ethics are the standards of behaviour that guide individual managers in their work. They operate in three domains:

Domain	Description	Example
Behaviour toward employees	Fair treatment, safe conditions, honest communication	Not exploiting information asymmetry in a performance review
Behaviour toward the organization	Avoiding conflicts of interest, protecting confidential information	Not using inside knowledge for personal trading
Behaviour toward other stakeholders	Honest dealing with customers, suppliers, and the public	Not misrepresenting a product’s capabilities

Key Ethical Problems in Business

Conflict of interest — when an activity benefits the employee at the expense of the employer. Example: a purchasing manager who awards contracts to a supplier they have a personal financial stake in.

Insider trading — using confidential information to gain from buying or selling stock. Illegal under securities law, but the ethical violation precedes the legal one.

Whistle-blower — an individual who calls out unethical, illegal, or socially irresponsible practices within their organization. Whistle-blowers face significant personal risk; many jurisdictions provide legal protections to encourage disclosure.

Why Ethics Matter Beyond Compliance

Laws set a floor — ethics fill the space between what’s legal and what’s right. Without a functioning ethical culture:

• Trust erodes between colleagues and with customers
• Teamwork breaks down
• Reputation suffers (often permanently)
• Regulatory exposure increases as ethical lapses become legal violations

The 2008–2009 financial crisis is the textbook case: many of the practices that caused it were technically legal but deeply unethical. Ethics failures at the individual level aggregated into a systemic collapse.

How It Appears Per Course

ADMN 201

Ch3 grounds the entire discussion of CSR in personal ethics first. The argument: organizational responsibility starts with individual moral standards. A firm cannot be ethical if its managers aren’t.

Cross-Course Connections

CorporateSocialResponsibility — CSR is the organizational expression of values that start as individual ethics
OrganizationalStakeholders — ethical decisions always affect stakeholders; identifying them is part of ethical reasoning
Argument-BusinessEthics — ethical decision-making is applied argument construction (PHIL252)
InformalFallacies — rationalization and motivated reasoning are the most common ethical failure modes

Key Points

• Ethics = individual moral standards. CSR = organizational duty (E = Individual, SR = Organization)
• Personal ethics develop from: family/culture/religion, education/peers, experience
• Codes of ethics exist to align individuals where personal values diverge
• Conflict of interest: activity benefits employee at employer’s expense
• Insider trading: using confidential info for stock gains — illegal and unethical
• Whistle-blower: someone who exposes wrongdoing internally or publicly

Open Questions

• How should a manager act when their personal ethics conflict with a direct instruction from leadership?

graph TD
    A[Personal Ethics\nfamily · culture · education · experience]
    A -->|shapes| B[Managerial Ethics\nstandards guiding individual managers]
    B -->|applied to| C[Behaviour Toward\nEmployees]
    B -->|applied to| D[Behaviour Toward\nthe Organization]
    B -->|applied to| E[Behaviour Toward\nOther Stakeholders]
    D -->|violation| F[Conflict of Interest\nInsider Trading]
    B -->|exposed by| G[Whistle-Blower]
    A -->|codified into| H[Organizational\nCode of Ethics]
    H -->|guides| B