Foundations and Theories of Business Ethics

Introduction

Business ethics is the systematic study of moral principles, values, standards, and reasoning as they apply to business decisions and organizational conduct. It asks not only whether an action is legal or profitable, but also whether it is fair, responsible, respectful, and worthy of trust. For managers, ethical reasoning is essential because business decisions affect multiple stakeholders: employees, customers, investors, suppliers, communities, regulators, and the natural environment.

Ethical problems rarely appear as simple choices between obvious right and wrong. Managers often face conflicts among profitability, transparency, privacy, safety, loyalty, justice, and social welfare. A decision may benefit one group while imposing costs on another. It may comply with the law yet violate professional standards or public expectations. Ethical theories provide structured ways to identify what is at stake, evaluate alternatives, and justify decisions.

This chapter introduces consequentialism, deontology, virtue ethics, theories of justice, rights-based ethics, care ethics, moral relativism, and social-contract perspectives. It also examines cognitive bias and moral disengagement, because ethical failure often results not from ignorance of moral principles but from distorted judgment, organizational pressure, or the rationalization of harmful conduct.

Learning Objectives

By the end of this chapter, the learner should be able to:

1. Explain the meaning, scope, and importance of business ethics.
2. Distinguish major ethical theories and their assumptions.
3. Apply ethical theories to complex managerial dilemmas.
4. Compare competing ethical arguments rather than relying on a single framework.
5. Recognize cognitive biases and mechanisms of moral disengagement.
6. Recommend ethically defensible decisions and organizational safeguards.

1. Ethics, Morality, Law, and Corporate Responsibility

Morality refers to beliefs and standards about right and wrong conduct. Ethics is the critical and systematic examination of those standards. Morality may be shaped by family, religion, culture, or personal experience; ethics seeks reasoned principles that can be examined and discussed publicly.

Law consists of enforceable rules established by legitimate authorities. Ethical obligations are broader than legal obligations. A company may legally collect extensive personal data while still violating reasonable expectations of privacy. Conversely, some ethical duties, such as keeping a promise to a colleague, may not be legally enforceable.

Compliance is adherence to laws, regulations, policies, and contractual requirements. Compliance is necessary but not sufficient for ethical conduct. A compliance-oriented organization asks, “What is permitted?” An ethically mature organization also asks, “What is responsible, fair, and worthy of trust?”

Corporate social responsibility (CSR) concerns an organization’s responsibilities toward society and the environment. Business ethics focuses primarily on the moral quality of decisions and conduct; CSR addresses how those responsibilities are expressed through corporate policies, strategies, and stakeholder relationships. The two fields overlap but are not identical.

An ethical decision generally requires attention to four questions:

• Who may be affected, and how seriously?
• What duties, rights, promises, or professional standards apply?
• What kind of character does the decision express or develop?
• Can the decision be explained openly to those affected?

2. The Nature of Ethical Dilemmas

An ethical dilemma occurs when important moral values or obligations conflict and no available option satisfies all of them. For example, a manager may need to decide whether to disclose a serious product defect immediately, risking financial loss and layoffs, or delay disclosure while further tests are conducted, exposing customers to potential harm.

Ethical dilemmas differ from ordinary business problems in three ways. First, they involve competing values rather than only technical constraints. Second, they often affect parties with unequal power and information. Third, the consequences may be distributed across time: a short-term gain can create long-term reputational, social, or environmental harm.

A disciplined ethical analysis should distinguish:

1. Facts: What is known, unknown, or disputed?
2. Stakeholders: Who bears benefits, risks, and responsibilities?
3. Alternatives: What options exist beyond the initial two choices?
4. Values: Which duties, rights, virtues, and consequences matter?
5. Authority: Who has the legitimate power to decide?
6. Accountability: How can the decision be explained and reviewed?

Managers should avoid prematurely framing a problem as “profits versus ethics.” Ethical creativity may reveal alternatives such as phased disclosure, independent review, redesigned incentives, compensation, or temporary suspension of a risky activity.

3. Consequentialism: Judging Actions by Outcomes

Consequentialism evaluates conduct by its results. An action is morally right, on this approach, when it produces better consequences than available alternatives. Utilitarianism is the best-known consequentialist theory. Classical utilitarian thinkers Jeremy Bentham and John Stuart Mill argued that decisions should promote overall well-being.

A simplified utilitarian analysis can be expressed as:

The summation symbol means that benefits and harms across relevant stakeholders are considered. This is not a precise accounting formula in most managerial settings; it is a reasoning model. It assumes that consequences can be identified sufficiently, that relevant effects can be compared, and that all affected interests receive moral consideration.

A consequentialist analysis asks:

• What are the probable benefits and harms?
• How severe, widespread, and lasting are they?
• How likely is each outcome?
• Who receives the benefits and who bears the costs?
• Are there indirect or delayed effects?
• Is there a less harmful way to obtain similar benefits?

If probabilities and outcomes can reasonably be estimated, expected consequences may be considered using:

Here, pᵢ is the probability of outcome i, and vᵢ is the estimated moral value of that outcome. The expression is useful only when probabilities and values are sufficiently meaningful. It should not create false precision, especially where human dignity, irreversible harm, or uncertainty is involved.

Strengths. Consequentialism encourages attention to real-world effects, stakeholder impact, efficiency, and unintended consequences. It is valuable in public policy, safety decisions, resource allocation, and impact assessment.

Limitations. It can permit serious harm to a minority if the aggregate benefit is large. It may also be difficult to compare money, health, dignity, freedom, and ecological integrity. Forecasting errors can make apparently rational decisions dangerous. Finally, a purely outcome-based approach may treat people as instruments rather than as holders of inviolable rights.

4. Deontology: Duties, Rules, and Respect for Persons

Deontological ethics evaluates actions according to duties, principles, and rules rather than only outcomes. Immanuel Kant’s formulation emphasizes that persons must be treated as ends in themselves, never merely as means to another objective.

A manager using deontological reasoning asks:

• What duties apply to this situation?
• Have promises, contracts, and professional obligations been honored?
• Is the action consistent with a rule that everyone could reasonably follow?
• Are individuals being respected as autonomous persons?
• Is anyone being deceived, coerced, manipulated, or used merely as a tool?

The universalizability test asks whether the principle behind an action could be willed as a general rule. If a manager falsifies a report whenever accuracy threatens performance targets, the practice undermines the very institution of reliable reporting. Universalized deception would make reporting systems ineffective.

Strengths. Deontology protects individual dignity, rights, promises, and procedural fairness. It explains why some actions—such as torture, fraud, or deceptive consent—may be wrong even if they generate benefits.

Limitations. Duties can conflict. A manager may owe confidentiality to an employee while also owing a duty to warn others of serious danger. Rigid rule-following may produce harmful results when circumstances are exceptional. Deontological reasoning therefore requires careful interpretation of duties and attention to competing obligations.

5. Virtue Ethics: Character and Practical Wisdom

Virtue ethics focuses on the moral character of the decision-maker and the qualities needed for human and organizational flourishing. Important virtues include honesty, courage, justice, temperance, humility, compassion, reliability, and practical wisdom.

The central question is not merely “What rule applies?” or “What outcome is best?” but “What would a good and practically wise person do in these circumstances?” Virtue ethics recognizes that ethical performance depends on habits developed over time. A culture that rewards manipulation may gradually normalize dishonesty even when formal policies condemn it.

Practical wisdom involves interpreting general values in particular contexts. Courage does not mean reckless disclosure; it may require a proportionate, evidence-based decision despite pressure. Compassion does not mean abandoning standards; it may require understanding how a policy affects vulnerable employees.

Virtue ethics is especially useful for leadership. Leaders communicate values through what they reward, tolerate, investigate, and disclose. Ethical culture is therefore not created by codes alone. It is embodied in routines, role models, promotion criteria, incentive systems, and responses to misconduct.

A limitation is that cultures may disagree about which traits count as virtues. In addition, appealing to character can become vague unless managers identify concrete practices through which virtues are demonstrated.

6. Justice and Fairness

Justice concerns the fair distribution of benefits, burdens, opportunities, and procedures. Several forms are relevant to business.

John Rawls’s theory of justice offers two influential ideas. First, basic liberties should be protected equally. Second, social and economic inequalities should be arranged so that positions are open under fair equality of opportunity and the least advantaged benefit as much as reasonably possible—the difference principle.

A practical adaptation is the veil-of-ignorance test: would a policy seem fair if decision-makers did not know whether they would occupy the position of executive, contractor, customer, temporary worker, or vulnerable community member? The test does not eliminate all disagreement, but it exposes policies designed solely around the interests of the powerful.

Justice analysis is important in executive compensation, layoffs, algorithmic hiring, taxation, access to essential products, environmental burdens, and global supply chains. Its limitation is that reasonable people may disagree about what counts as an equal share, a relevant difference, or a fair remedy.

7. Rights-Based Ethics

Rights-based ethics holds that individuals possess legitimate claims that others must respect. Rights may include privacy, bodily safety, freedom of expression, property, due process, informed consent, and freedom from discrimination. Rights can be negative, requiring non-interference, or positive, requiring assistance or provision under appropriate conditions.

In business, rights analysis asks:

• Whose rights are affected?
• Is the right legally recognized, morally fundamental, or both?
• Has valid consent been obtained?
• Is the limitation necessary, proportionate, and transparent?
• Can the same business objective be achieved with less intrusion?

For example, employee monitoring may support cybersecurity, but it can infringe privacy if it is excessive, secret, unrelated to legitimate purposes, or retained indefinitely. Ethical monitoring requires purpose limitation, notice, proportionality, security, access controls, and review.

Rights are not always absolute. Freedom of expression may be limited by credible threats; property rights may be restricted by safety regulation. Nevertheless, rights-based reasoning places boundaries around what organizations may do for profit or efficiency.

8. Care Ethics and Relational Responsibility

Care ethics emphasizes relationships, dependency, empathy, responsiveness, and the needs of particular people. Associated with scholars such as Carol Gilligan and Nel Noddings, it developed partly as a critique of moral theories that portrayed ethical reasoning as abstract, impartial, and detached.

Care ethics asks:

• Who is vulnerable or dependent in this relationship?
• What responsibilities arise from trust, history, and proximity?
• How will the decision affect relationships and the capacity to care?
• Have affected people been listened to rather than treated as statistics?

Care is highly relevant to people management, health services, education, customer support, community engagement, and responsible restructuring. A manager who closes a facility may have a duty not only to calculate compensation but also to communicate respectfully, provide transition support, and acknowledge community dependence.

Care ethics does not mean favoritism or unlimited sacrifice. Care must be balanced with fairness and impartiality, because exclusive attention to familiar stakeholders can neglect distant or less powerful groups. Its contribution is to make vulnerability, emotion, dependence, and context morally visible.

9. Moral Relativism and Its Critical Use

Moral relativism holds that moral judgments are dependent on cultural, social, historical, or individual frameworks rather than governed by one universally valid standard. Descriptive relativism observes that cultures differ in moral beliefs. Normative relativism claims that conduct is right if it conforms to the norms of the relevant culture or group.

Cultural awareness is essential in international management. Practices concerning negotiation, gifts, hierarchy, communication, family obligations, and time may vary. Managers should avoid assuming that their own conventions are universally correct.

However, “when in Rome” cannot justify every practice. Norms may be internally contested, imposed by elites, or harmful to vulnerable people. A company should not defend forced labor, bribery, discrimination, or unsafe conditions simply by describing them as local customs. A balanced approach combines cultural humility with minimum standards grounded in human dignity, safety, non-discrimination, and freedom from coercion.

Relativism is therefore most useful as a warning against ethnocentrism, not as an excuse for moral silence. Managers should distinguish respectful adaptation from complicity in abuse.

10. Social-Contract Perspectives

Social-contract approaches view business activity as legitimate because it operates within a network of explicit and implicit agreements among individuals, organizations, governments, and communities. Businesses receive privileges—such as legal personality, limited liability, infrastructure, educated workers, and access to markets—and owe responsibilities in return.

At the societal level, a corporation’s “license to operate” depends on public trust and acceptance. At the organizational level, employees and employers exchange labor, compensation, loyalty, development, and protection. At the market level, customers expect truthful information and fair dealing.

Integrative social-contract theory distinguishes broad societal norms from local norms. Local business practices may be accepted only if they do not violate fundamental hypernorms such as respect for human rights, honesty in transactions, and avoidance of unnecessary harm.

Social-contract reasoning is valuable for analyzing stakeholder expectations, corporate legitimacy, public-private partnerships, environmental responsibilities, and the governance of emerging technologies. Its limitation is that actual agreements are often unequal: communities may have little bargaining power, and consent may be implied rather than explicit. Managers must therefore examine whether the social contract is genuinely fair and inclusive.

11. Comparing Ethical Theories

No single theory resolves every business dilemma. Theories illuminate different dimensions of a decision.

A robust managerial process uses ethical triangulation: analyze the dilemma through several theories, identify convergences and conflicts, then select an option that is proportionate, transparent, and defensible. If every major framework identifies serious danger, the burden of justification becomes especially high.

12. Bias, Bounded Rationality, and Moral Disengagement

Ethical reasoning is affected by cognitive limitations. Managers operate under time pressure, incomplete information, incentives, hierarchy, and emotional stress. Common biases include:

• Confirmation bias: seeking evidence that supports an existing view.
• Anchoring: relying excessively on an initial number, forecast, or proposal.
• Availability bias: judging likelihood by easily recalled examples.
• Overconfidence: overestimating knowledge, control, or forecasting accuracy.
• In-group bias: favoring members of one’s own team, nationality, or social group.
• Status quo bias: treating existing practice as morally acceptable because it is familiar.
• Sunk-cost bias: continuing a flawed project because resources have already been invested.
• Framing effect: making different judgments depending on how the same facts are presented.

Bias does not automatically make a decision wrong, but it can distort stakeholder identification, risk assessment, and interpretation of evidence. Useful safeguards include independent review, dissenting voices, premortems, anonymous reporting, structured criteria, data-quality checks, and decision records.

Moral disengagement, examined prominently in the work of Albert Bandura, describes psychological mechanisms that allow people to violate standards without experiencing proportionate guilt. These mechanisms include:

• Moral justification: presenting harmful conduct as serving a noble goal.
• Euphemistic labeling: calling layoffs “rightsizing” or surveillance “optimization.”
• Advantageous comparison: claiming that conduct is acceptable because others behave worse.
• Displacement of responsibility: blaming senior leaders or policy.
• Diffusion of responsibility: assuming that no individual is accountable because many participated.
• Distortion of consequences: minimizing or ignoring harm.
• Dehumanization: describing affected people as numbers, obstacles, or problems.
• Attribution of blame: claiming victims caused their own mistreatment.

Ethical leadership interrupts these mechanisms by using plain language, naming victims and harms, assigning responsibility, protecting dissent, and rewarding truth-telling rather than only favorable results.

13. A Practical Ethical Decision Framework

The following process can be used by executives and management teams.

Step 1: Define the dilemma. State the decision in moral as well as commercial terms. Avoid vague descriptions such as “a communications issue.”

Step 2: Establish the facts. Separate verified facts, assumptions, forecasts, and unknowns. Identify what additional information is needed.

Step 3: Map stakeholders. Include direct and indirect stakeholders, future stakeholders, vulnerable groups, and those without representation.

Step 4: Generate alternatives. Search for options that reduce harm, preserve rights, and address root causes. Include postponement, consultation, redesign, and independent review.

Step 5: Apply multiple theories. Test alternatives for consequences, duties, rights, fairness, virtues, care, cultural legitimacy, and social trust.

Step 6: Examine bias and pressure. Ask who benefits from the current framing, whether incentives distort judgment, and whether dissent is safe.

Step 7: Decide and justify. Select the option with the strongest overall ethical justification, not simply the easiest or most profitable option.

Step 8: Implement safeguards. Assign responsibility, document assumptions, communicate honestly, monitor outcomes, and provide remedy where harm occurs.

Step 9: Review. Conduct a post-decision evaluation. Ethical accountability includes learning from unintended consequences.

A useful publicity test is: “Would I be prepared to explain this decision, with the same facts, to affected employees, customers, regulators, and an independent journalist?” The test is not decisive, but discomfort may reveal secrecy, inconsistency, or weak justification.

14. Illustrative Case: The Predictive Hiring System

Background

A fictional company, TalentSphere, introduces an artificial-intelligence system to rank job applicants. The system is trained on ten years of historical hiring data. It promises lower recruitment costs and faster selection.

Problem

After deployment, managers observe that applicants from certain neighborhoods and institutions receive consistently lower scores. The vendor claims that the system does not use protected characteristics such as gender or ethnicity. However, location, employment gaps, and educational history may function as proxies. Suspending the system would delay recruitment and impose costs, while continuing it may reproduce discrimination.

Analysis

A consequentialist analysis considers efficiency, improved matching, reduced costs, and the likely harms of exclusion, reputational damage, and loss of workforce diversity. Because discrimination can affect many applicants and persist over time, the expected harm may be substantial even if the system improves average hiring speed.

A deontological analysis asks whether applicants are being treated as persons entitled to fair consideration or merely as data points. If candidates cannot understand or challenge the basis of rejection, procedural duties may be violated.

Justice analysis examines distributive and procedural fairness. Are opportunities distributed fairly? Are applicants evaluated using job-relevant criteria? Can they appeal or request human review?

Rights-based reasoning raises concerns about equal opportunity, privacy, explanation, and protection from discriminatory treatment. Care ethics highlights the vulnerability of applicants who may have limited alternatives and the human consequences of being silently excluded.

Virtue ethics asks what kind of organization deploys an opaque tool without adequate testing: one committed to prudence and fairness, or one excessively focused on speed? Social-contract reasoning asks whether applicants and society would accept the practice if they understood its operation and had meaningful alternatives.

Approach and solution

TalentSphere should pause automated rejection, conduct an independent bias and validity audit, test outcomes across relevant groups, and examine whether variables are genuinely job-related. It should establish human review for borderline and rejected cases, provide meaningful notice and an appeal channel, limit data collection, document model changes, and monitor outcomes continuously. The company should involve legal, human-resources, data-science, and employee representatives in governance. If the system cannot meet fairness and explainability requirements, it should not be used for high-impact decisions.

Outcome

In this illustrative case, the company discovers that several variables are weak predictors of job performance but strong proxies for socioeconomic background. It removes them, improves the model, introduces structured interviews, and publishes an internal impact report. Hiring takes slightly longer, but the process becomes more defensible and the organization avoids embedding historical discrimination into future decisions.

Learning points

1. Technical neutrality is not the same as ethical neutrality.
2. Historical data may reproduce historical injustice.
3. Efficiency cannot alone justify rights violations or unfair exclusion.
4. Human oversight must be meaningful rather than merely symbolic.
5. Ethical governance requires monitoring after deployment, not only approval before deployment.

15. Contemporary Managerial and Governance Implications

Ethical management now includes data governance, algorithmic accountability, climate responsibility, supply-chain due diligence, cybersecurity, and responsible innovation. Digital systems can scale both benefits and harms. Automated decisions may obscure responsibility, while global supply chains can distance executives from labor and environmental consequences.

Organizations should establish a governance architecture that includes a clear code of conduct, independent ethics or compliance functions, protected whistleblowing, conflict-of-interest controls, training based on realistic scenarios, board oversight, supplier standards, impact assessments, and consistent disciplinary procedures. Codes are effective only when incentives and leadership behavior support them.

Incentive design deserves special attention. Targets based only on sales, speed, or quarterly earnings can encourage moral disengagement. Balanced performance systems should include customer outcomes, safety, employee well-being, compliance quality, sustainability, and evidence of responsible decision-making. Ethical performance should affect promotion and reward decisions.

Managers should also recognize that transparency is not merely disclosure of information. Responsible transparency requires information that is accurate, comprehensible, timely, relevant, and usable by those affected. Concealing uncertainty behind technical language is a form of ethical failure.

Challenges and Limitations of Ethical Frameworks

Ethical theories do not function as mechanical calculators. They require interpretation, judgment, and reliable facts. Consequences may be uncertain; duties may conflict; rights may be contested; virtues may vary across cultures; and stakeholder interests may be unequal. A framework can also be misused rhetorically: leaders may invoke “stakeholder value” while privileging powerful stakeholders, or cite “culture” to excuse exploitation.

Ethical reasoning should therefore be paired with institutional controls. Independent audits, separation of duties, traceable records, grievance mechanisms, consultation, and regulatory oversight reduce dependence on individual goodwill. Ethical maturity means designing systems in which responsible conduct is possible, expected, and protected.

Chapter Summary

Business ethics provides principles and methods for evaluating organizational conduct beyond legality and profitability. Consequentialism emphasizes overall outcomes; deontology emphasizes duties and respect for persons; virtue ethics focuses on character and practical wisdom; justice examines fair distribution and procedures; rights ethics protects legitimate claims; care ethics emphasizes relationships and vulnerability; relativism highlights cultural variation but cannot excuse fundamental abuse; and social-contract perspectives connect business legitimacy with mutual obligations and public trust.

Ethical dilemmas require fact-finding, stakeholder analysis, alternative generation, multi-theory evaluation, bias detection, transparent justification, implementation safeguards, and review. Cognitive biases and moral disengagement can distort judgment, especially where incentives, hierarchy, and uncertainty are present. Ethical leadership therefore requires both personal integrity and institutional design. In contemporary organizations, responsible use of data and AI, fair treatment, supply-chain accountability, transparency, and effective governance are central components of ethical management.

Key Terms

Ethics: Systematic reasoning about moral standards and conduct.

Morality: Beliefs and norms concerning right and wrong.

Consequentialism: An approach that evaluates actions by their outcomes.

Utilitarianism: Consequentialism focused on maximizing overall well-being.

Deontology: Ethics based on duties, rules, and respect for persons.

Universalizability: Testing whether an action’s underlying rule could apply consistently to everyone.

Virtue ethics: Ethics focused on character, habits, and practical wisdom.

Justice: Fairness in distribution, procedure, treatment, and remedy.

Rights: Legitimate claims that others or institutions must respect.

Care ethics: An approach emphasizing relationships, empathy, dependency, and vulnerability.

Moral relativism: The view that moral judgments depend on cultural or social frameworks.

Social contract: The network of explicit and implicit obligations that legitimizes cooperation.

Stakeholder: An individual or group affected by, or able to affect, organizational activity.

Moral dilemma: A conflict among significant moral obligations or values.

Cognitive bias: A systematic tendency that can distort judgment.

Moral disengagement: Psychological processes that permit harmful conduct without normal self-condemnation.

Ethical culture: Shared organizational values and practices that shape conduct.

Procedural justice: Fairness of the process used to make and implement decisions.

Ethical triangulation: Evaluating a dilemma through several ethical theories.

Moral accountability: Responsibility to explain, justify, and remedy one’s decisions and conduct.

Review Questions

Short Answer Questions

1. Distinguish business ethics from legal compliance.
2. What is the central question asked by consequentialism?
3. Explain the difference between distributive and procedural justice.
4. What is moral disengagement?
5. Why is cultural relativism insufficient as a complete guide to international business conduct?

Long Answer Questions

1. Compare consequentialism and deontology, including one strength and one limitation of each.
2. Explain how virtue ethics contributes to ethical leadership and organizational culture.
3. Discuss the role of rights and care ethics in employee monitoring.
4. Explain the social-contract perspective on corporate legitimacy and stakeholder responsibility.
5. Describe a systematic process for resolving a complex business-ethics dilemma.

Analytical / Application Questions

1. A company can reduce costs by outsourcing production to a supplier with poor safety practices but no confirmed legal violations. Analyze the decision using consequentialism, deontology, justice, rights, and social-contract perspectives.
2. An executive asks analysts to present only favorable evidence before a major investment decision. Identify the likely biases and moral-disengagement mechanisms, and propose governance safeguards.
3. An AI-based promotion tool disadvantages employees who took career breaks for caregiving. Develop an ethically defensible response using at least four ethical frameworks.

Multiple Choice Questions with Answers

Question 1

Which ethical theory primarily evaluates an action by comparing its overall benefits and harms?

A. Consequentialism

B. Deontology

C. Virtue ethics

D. Rights-based ethics

Correct Answer: A. Consequentialism

Question 2

A manager refuses to falsify safety data even though doing so would protect short-term profits. Which principle is most directly reflected?

A. Moral relativism

B. Deontological duty

C. Advantageous comparison

D. Distributive utility

Correct Answer: B. Deontological duty

Question 3

Which form of justice focuses on whether affected parties had a fair opportunity to be heard?

A. Distributive justice

B. Corrective justice

C. Procedural justice

D. Retributive justice

Correct Answer: C. Procedural justice

Question 4

Calling mass layoffs “rightsizing” in order to make the harm appear less serious is an example of:

A. Universalizability

B. Moral justification

C. Euphemistic labeling

D. Practical wisdom

Correct Answer: C. Euphemistic labeling

Question 5

What is a central concern of care ethics?

A. Maximizing aggregate wealth only

B. Maintaining relationships and responding to vulnerability

C. Applying identical rules without exception

D. Following local customs regardless of harm

Correct Answer: B. Maintaining relationships and responding to vulnerability

Question 6

Which statement best describes the relationship between law and ethics?

A. Everything legal is automatically ethical

B. Ethics applies only where law is absent

C. Ethical obligations can be broader than legal requirements

D. Law and ethics are identical systems

Correct Answer: C. Ethical obligations can be broader than legal requirements

Question 7

The veil-of-ignorance test asks decision-makers to:

A. Ignore all stakeholder consequences

B. Choose a policy without knowing which social position they will occupy

C. Follow the customs of the most powerful group

D. Maximize the firm’s quarterly earnings

Correct Answer: B. Choose a policy without knowing which social position they will occupy

Question 8

A manager searches only for evidence supporting a preferred investment proposal. This is most clearly:

A. Confirmation bias

B. Sunk-cost bias

C. Care ethics

D. Corrective justice

Correct Answer: A. Confirmation bias

Question 9

Why is moral relativism limited as a guide to international business?

A. It denies that cultures differ

B. It may be used to excuse serious abuse as local custom

C. It requires universal rules in every situation

D. It focuses exclusively on financial outcomes

Correct Answer: B. It may be used to excuse serious abuse as local custom

Question 10

In the illustrative AI hiring case, the most ethically appropriate first response to evidence of discriminatory outcomes is to:

A. Continue using the system without review

B. Delete all historical hiring data immediately

C. Pause automated rejection and conduct an independent assessment

D. Publish only the system’s accuracy rate

Correct Answer: C. Pause automated rejection and conduct an independent assessment