«Business Ethics» - Free Essay Paper

Business Ethics


The notion of morality refers to reasons for action in which moral agents must be capable of acting morally. The ascription of blame, liability, or culpability necessitates the presumption of moral agency, which, in turn, triggers the presumption of intentionality. The paper explores the difference between moral and causal responsibility, the moral responsibility of companies, and how corporate information disclosure can help eliminate unethical practices, including insider trading. The paper highlights the need for businesses to act morally by establishing appropriate structures and mechanisms that foster and reinforce ethical action while anticipating and resolving potential ethical issues.


# 2. The Distinction between Causal Responsibility and Moral Responsibility

De George highlights the close connection between responsibility and obligation (99). The conceptualization of responsibility highlights several elements: first, the presence of an autonomous person who acts, and second, the presence of an act performed intentionally and willingly. Third, the conceptualization of moral responsibility supposes the existence of an unwanted consequence, and fourth, the presence of causal linkage between the person, the act, and the consequences. Moral responsibility manifests itself when an individual deliberately and freely acts immorally. Moral responsibility draws from the judgments on what is considered right or wrong.

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Moral responsibility implies a capacity to make rational decisions, which validates holding moral agents accountable for their actions. Praise and blame remain the most common reactions that follow individual’s action or failure to conduct a morally significant action. The awarding of praise or placing of blame for the action or failure to act implies moral responsibility. For instance, an individual who encounters a car accident warrants recognition for saving the victims and removing them from the car. In contrast, a person may attract blame for failing to call for help. Causal responsibility refers to the morally neutral utilization of the liability concept. It almost exclusively applies to outcomes. As such, causal responsibility only describes the cause of the circumstance, being devoid of imputing agency or deliberation to the cause action.

Causal responsibility is different from the moral responsibility since there is no implication of praise or blame. Indeed, causal responsibility is mostly concerned with mere happenings instead of the actions. For instance, a locust infestation can be held responsible for poor crop production, the resultant food shortage, and starvation. Similarly, an infant can be held casually responsible for dropping a glass of milk and soiling the rug, but the child does not bear moral responsibility since the infant did not do this knowingly and willingly.

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The Excusing Conditions for Moral Responsibility

The excusing conditions for moral responsibility mean the impossibility of action. Individuals are excused from moral duty in the following events: (a) the obligation in question is impractical to perform; (b) the person does not possess the capability needed in the given case. The other excusing conditions for moral responsibility encompass (c) the lack of the opportunity of undertaking the action; and (d) the situations are beyond the individual’s control (De George 100). For instance, a person who is driving carefully and responsibly may not be morally responsible for hitting a person who darts in front of the car provided that it was impossible to stop the car safely.

Conditions Disqualifying or Diminishing the Required Knowledge

Knowledge and will are pertinent to moral action; hence, moral responsibility is diminished or eliminated when will and knowledge are deficient or less than wholly present (De George 101). The conditions precluding or reducing the needed knowledge may stem from excusable and invincible ignorance. One of the tests regarding whether ignorance is excusable relates to whether the average person of goodwill would have been aware of the circumstances or taken into account the possibility of the consequences in question (De George 101).

Conditions Disqualifying or Diminishing the Required Freedom

The circumstances impairing or diminishing the needed freedom to select the action may stem from (a) the lack of alternatives; (b) the absence of control; (c) external coercion; and (d) internal pressure (De George 102). In the event that there is only one possible action, alternatives do not exist, including the non-performance of the action. Similarly, if there is no reasonable alternative to the action, then the individual’s moral responsibility reduces. The absence of control eliminates all moral responsibility in some instances and diminishes the responsibility in others. For example, a person may not be morally responsible for actions that he or she performs in sleep since the individual bears no control over the actions (De George 102).

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In summary, excusing conditions avail the motives for reducing or revoking moral responsibility. Excusing conditions, such as the impossibility of an action, can eliminate the individual’s moral responsibility and accountability (De George 105). The postulations of moral agency and intentionality of the action are central to the attribution of moral responsibility (De George 104). Moral responsibility presumes the capacity for making rational decisions, which validates holding moral agents accountable for their actions. Individuals are morally responsible for the evident and immediate consequences along with the other reasonably foreseeable consequences of the actions.

The core conditions necessary for ascription of moral responsibility include the intentionality, voluntariness, being capable of providing an account of the individual’s actions, causal efficacy, and foreknowledge of potential consequences of an action. Causation acts as the vehicle conveying moral responsibility; however, moral responsibility does not impose causation. The causal chain of liability extends to cases where there are many agents involved in giving and transmitting the command for the action. For instance, a senior military officer may be held responsible for the actions of subordinates. Moral actions do not involve coercion but rather necessitate that one has a choice, knowledge of the action, and intention (De George 100). An individual can also be morally responsible for deliberately failing to conduct what he or she was obliged to do (De George 100).

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# 4. The Difference between a Stockholder and a Stakeholder

In a narrow sense, stakeholders represent identifiable groups or persons that the corporation relies on for survival, such as senior management, subordinates, and other employees. Stakeholders broadly represent anyone who expresses interest or is affected by the company in terms of policies, products, and work processes (De George 190). As such, stakeholders can encompass protest groups, suppliers, shareholders, bondholders, public interest groups, local communities, trade associations, competitors, labor unions, and government agencies. On the other hand, shareholders in a corporation enjoy limited liability. They are the stakeholders within a company since they own part of the enterprise via stock ownership and are principally interested in the maximization of profits. Stakeholders are not always shareholders; moreover, stakeholders are primarily interested in the performance of a corporation for motives other than mere stock appreciation (De George 191). 

The Possible Levels of Moral Responsibility within a Corporation

Corporations cannot be reduced to the human beings who comprise the corporations; nonetheless, companies cannot operate or act without people (De George 102). Corporations have moral and legal responsibilities based on how the company operates and remains responsible for what it undertakes and fails to do. To the extent that corporations act intentionally, companies can be held morally responsible for their actions, for example, injuries inflicted to the users during the utilization of their products, especially if the latter are defective. Similarly, organizations can also be made liable for injuries that their suppliers inflict on third parties.

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Companies are expected to “do no harm” and treat people with respect (De George 193). Corporate operations must not harm the employees, clients, communities, general public, and the environment. Second, since a corporation draws from the free enterprise system, organizations possess a moral obligation not to compromise the freedom and the values of the system (De George 193). In addition, corporations have a moral duty to be fair in all of their transactions. Fairness in transactions ranges from reasonable compensation to provision of quality products and services. Corporations also have a moral obligation to adhere to the contracts that they enter freely given that contracts remain the lifeblood of free-enterprise system (De George 193).

Stakeholder relations should recognize the moral relationships intrinsic to the corporate activities (De George 192). For example, a firm may contend that it cannot afford sufficient sanitation in the sweatshops and remain competitive in the global marketplace. The decision to subject its workers to unsanitary conditions is sufficient for the managers to be held culpable for the harms resultant from the inappropriate conditions. Some persons may claim that they are relatively free of blame for the conditions of the stakeholders since they do not possess the requisite knowledge or their actions are insufficiently voluntary. Notwithstanding, stakeholder relations should not be perceived as existing between isolated entities but rather embedded within a collection of relationships that demand moral responsiveness. 

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The Degree to Which a Company Can Be Held Responsible for Its Actions as a Moral Entity

A moral agent is held morally liable for harm or injury in the event that (a) the agent has caused the harm; (b) the agent did so knowingly and willingly; and (c) the agent had the opportunity to prevent the injury or harm. Similarly, an organization is held morally liable for harms inflicted provided that the outlined factors were present (De George 106). Moral responsibility within organizations may be individual in the sense that every employee remains accountable for doing the right action. To some extent, corporations do not seem to be conducive to the moral responsibility since senior managers can be encouraged to turn a profit at the expense of ethical and legal considerations. Corporate employees cannot claim obedience as an excuse for acting immorally or perpetrating immoral acts.

Corporations seek various goals (linked to making profit) and manifest procedures to decide on the best ways to attain the goals. Employees can be morally responsible, but that does not imply that corporations, as an abstract social construct, cannot be held morally responsible (De George 106). The corporate decision-making mimics human deliberation owing to the numerous conflicting goals sought. Moral responsibility can be borne by the employees and policymakers to the degree that each one engaged in policy formulation, oversight, or implementation. Board members have moral responsibility for decisions that they make, as well as the decisions that the board may fail to make. In order to be effective in safeguarding the interests of shareholders and judging the management’s performance, board members should be separated from the management (De George 193).

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In summary, corporations have the moral obligation not to injure those whom their actions affect. Since the actions of corporations influence people, corporate actions can be appraised from a moral point of view (De George 109). Considering the fact that it is immoral for an individual to discriminate, it is equally immoral for a corporation as well. Similarly, it is equally praiseworthy for an organization to give to charity as it is for an average person (De George 110). Corporations must institute channels and procedures for accountability and establish input lines in which stakeholders can make their concerns, perceptions, and demands known based on the company’s legitimate responsibilities (De George 197).

# 5. The Necessity for Open and Public System of Corporate Disclosure

The ethics related to corporate governance has faced growing scrutiny owing to the highly publicized corporate scandals such as one with Enron. Enron’s case demonstrates the necessity of ethical conduct in business, procedural restraints (organizational culture), and checks to mend the structural defects that allowed the illegality to occur (legislation) (De George 213). The information that a company is morally obligated to disclose aligns with the legal requirement of disclosure (De George 218).

The moral grounds for the disclosure of corporate information center on two moral principles. First, every individual enjoys the right to access the information needed to enter into a transaction. Second, every individual possesses the right to be aware of the actions of others that might severely and negatively affect him or her (De George 218). Employees enjoy the right to know the overall policy of the corporation in areas where the workers may harbor moral concerns. Government also possesses the right to be aware that corporations are adhering to the law. Companies must also disclose to their suppliers whatever is needed to make the contracts fair. Lastly, companies must disclose to consumers any dangers presented by the utilization of the corporation's products, as well as to the public the environmental impact of the corporate operations (De George 224). Open and public disclosure of meaningful financial and other corporate information aids in preserving fair dealing and safeguarding against fraud. The steady flow of timely, accurate, and comprehensive corporate information can help the public make sound investment decisions (De George 218).

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Misappropriation and Insider Trading

Misappropriation in a corporation may involve employees or senior executives employing deceit or trickery to misuse or steal an organization’s resources, including information (De George 227). Misappropriation represents the exploitation of information which an employee, as a private individual, has no right to access. Misappropriation relates to insider trading in the sense that the latter involves the manipulation of insider information to create opportunities (mainly financial) for personal gain.

The term ‘insider trading’ delineates the trading of a firm’s stock or other securities by insider who have access to material information that is not yet in the public domain. The unlawful practice of insider trading occurs when insiders trade securities, violating the fiduciary duty or position of trust (De George 226). Insider information may take the form of trade secrets and corporation’s plans and strategy. Insider trading is illicit and unethical owing to the intrinsic unfairness of the act since insiders can exploit the information for personal gain. Indeed, insider trading amounts to securities fraud given that insiders exploit insider information for personal benefit at the expense of other investors. The moral problems related to insider information center on the conflict of interests that features when insiders make use of the insider information while remaining members of a company (De George 226).











Arguments Raised in Support of Insider Trading

Those in support of repealing laws banning insider trading contend that insider trading grounded in material non-public information benefits all investors since it allows for a speedy introduction of new information into the market. Proponents of insider trading also argue that it offers an incentive for insiders to make public deficiencies in the company, which improves investor decisions and shortens the markets adjustment time. Proponents of insider trading claim that that elimination of insider trading is not worth the effort since insider trading is pervasive and constitutes a victimless act (De George229). Lastly, proponents of such trading state that insider trading is not unethical in itself since it renders the market more efficient. However, this claim disregards the fact that even if a trade is legal, this would not necessarily make it ethical.

Arguments Raised against Insider Trading

The SEC contends that insider trading undermines the public’s interest in investing in what the public may consider an unfair market in which insiders enjoy the edge (De George 229). Efficiency within securities markets necessitates equal informational playing field. Consequently, insider trading amounts to rigging securities market to the advantage of insiders, which undermines the incentive for the public to trade in the stock exchange.

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In summary, corporations have a moral obligation of disclosing appropriate information to those who the company enters into a transaction with, as well as those whom its actions seriously and negatively affect. Corporations are expected to divulge information promptly so as to avert special privilege to an insider (De George 229). An open and pubic system of disclosure in companies is necessary to safeguard investors; sustain fair, efficient, and orderly organization; and foster capital formation. Those who are involved in illicit insider trading misappropriate by stealing information that they have accessed in their corporate role and that they immorally exploit in pursuit of personal gain (De George 232). The efficiency arguments raised in defense of insider trading fail owing to the fact that efficiency is not the sole factor shaping securities market. Arguments raised in support of insider trading ignore the centrality of fairness as a necessary ingredient in stock markets. Similarly, those who act based on insider information contravene their fiduciary obligations to the corporations, which may harm the moral responsibility of the organization (De George 230).


An individual is considered morally responsible for an action in the event that the agent caused the action, the agent was aware of the action, and the agent could have prevented the harm. Organizations fall under similar expectations as individual agents with the capability of acting responsibly and being subject to ascriptions of moral responsibility in the event that the actions of the corporations fall below the accepted moral standards and norms. Any conclusion that neither the company nor the corporate employees have a moral responsibility would be problematic. On the one hand, moral responsibility can be attributed to the corporation; however, if only companies suffer punishment, the people who are morally responsible would go unpunished. On the other hand, moral responsibility can be assigned to corporate employees. However, if only employees suffer punishment, the corporation could persist to encourage or demand illegal or immoral behavior. Consequently, it is plausible to conclude that both corporate employees and company bear moral responsibilities and should suffer consequences for any harm caused.

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