BSB111 Lecture notes week 1 to 4
Ethics is concerned with how we should behave. Theories describe the right way to
make a decision.
Morality consists of what persons ought to do to conform whereas ethical theory
concerns the philosophical reason for and against aspects of social morality
Some may say that business ethics is incompatible with the business' goal of making a
Law doesn't cover everything, it is impossible to predict all situations.
Kohlberg's Theory of Moral Development
1. Stage 1 - pre-conventional - avoid punishment, self centred
2. Stage 2 - pre-conventional - self centred, do things that bring about benefit.
3. Stage 3 - conventional - conforming to norms, immediate group of people
4. Stage 4 - conventional - conforming to norms, rules of the greater community
5. Stage 5 - post-conventional - motivated by moral/ethical principles, follow laws
but question and evaluate them
6. Stage 6 - post-conventional - have no regard for law, base all decisions on
Ethical theory operates at Stage 5 and 6.
Approaches to Ethical Theory
1. Egoism - supreme principles is to promote one's well being. Would cause chaos
2. Utilitarianism - moral worth of actions is determined by their consequences. An
action is right is if leads to the best possible balance of good consequences.
3. Kantian Ethics - actions are morally right or wrong independent of their
consequences. For an action to be a moral action it must be:
Universal Acceptability - can the act be a rule performed by everyone
Respect - treating a person exclusively as a means to some ends fails to
give them respect
Reversibility - would you like to be on the receiving end of such action.
4. Virtue Ethics - cultivation of a virtuous character is seen as morality's primary
function. What would a virtuous person do in this situation?
Regulation is the control of corporate and commercial activities through a system of norms and
rules which may be promulgated either by government agencies or private actors, or by a
combination of the two.
Law is just one means of regulation. Others include self-regulation, industry code of conduct
(e.g. Australian medical association code of ethics, Australian institute of chartered accountant
members’ handbook), regulatory bodies and the market (consumers).
Three theories of regulation.
Public Interest Theories Theories of regulation that are based on a view that those responsible for regulation do so with
the objective of promoting the general welfare of the community. Can be further subdivided to
welfare economics approach and political approach. Welfare economics approach suggests that
regulation is a response to imperfections in the market, known as market failure and correcting
market failure increases the community’s general welfare and is thus in public interest.
Examples of market failure are ‘anti-competitive monopolies and public goods.’ Political
approach suggests that values such as social justice and redistribution are what can justify
regulation. Examples of regulation justified under a political public interest approach are income
tax laws and social security, anti-discrimination law.
These are different because the welfare economics approach considered the public good to be
only increasing efficiency from an economic viewpoint.
Private Interest Theories
Recognises that regulation often benefits particular groups in society, and not always those it
was seemingly intended to benefit. Private interest theories are sceptical of the purity of the
public goals that those who regulate seek to pursue. It assumes that regulation emerges from
individuals or groups motivated to maximise self interest. Private interest theories stress the
ease in which regulatory failure and regulatory capture can occur.
Regulatory failure is where the collective costs of regulation outweigh the benefits (eg.
Jaywalking, although technically an offence, it would cost far more to enforce it regularly than
the benefit it would bring).
Regulatory capture is when officials within regulatory institutions who are charged with
promoting collective welfare develop such close relationships with those they regulate that they
promote the narrow interest of this group instead of broader community.
Broad term for a numbers of different theories. Tripartism is the focus on cooperation, suggests
public interest groups become a legitimate 3 party in the regulation process between the
regulating agency and the regulated. The public interest group has access to all information
they have a seat at the negotiating table and has the right to take action to enforce the
regulation just like the regulator. This avoids the problems of cooperation between only two
parties leading to regulatory capture or corruption.
A statutory authority that is established by an A