Business Ethics¶

IESE MBA Year 1 -- Professor Ricardo Calleja (with Professor Oscar Gonzalez-Peralta) Course Code BEN -- 10 Sessions, 3 Parts Technical Notes: BEN-157-E (Three Lenses), BEN-148-E (See Judge Act), BEN-144-E (Frequent Ethical Issues), BEN-164-E (FAQs I: Personal), BEN-165-E (FAQs II: Organizational), BEN-166-E (FAQs III: Social)

Why This Matters¶

Business ethics is not a compliance exercise designed to keep you out of the newspaper. It is the course that asks the most fundamental question an MBA student will face: what kind of leader are you becoming? Every other course in the program equips you with tools -- financial models, strategic frameworks, organizational theories -- but tools are morally neutral. A discounted cash flow analysis can justify a factory that poisons a river just as easily as one that employs a town. Business ethics is where you develop the judgment to distinguish between the two, and the character to act on that judgment when doing so is costly, ambiguous, or unpopular.

The deeper reason this course matters is that business itself is a profoundly human activity. Companies are not abstract profit-maximizing machines; they are communities of people making decisions that shape other people's lives. Every pricing decision, every hiring decision, every product launch, every negotiation involves real human beings with dignity, interests, and rights. The ethical dimension is not layered on top of business decisions as an afterthought -- it is woven into every decision from the start. Managers who cannot see this dimension are not just ethically deficient; they are professionally incomplete, because they are blind to risks, stakeholder dynamics, and long-term consequences that will eventually surface whether they attend to them or not.

Finally, this course is about building organizations that last. The cases in the curriculum -- Theranos, Purdue Pharma, Uber -- are not cautionary tales about bad people. They are structural analyses of what happens when organizations prioritize short-term results over the processes, cultures, and character formation that sustain long-term value creation. The companies that endure are not the ones with the best compliance programs but the ones whose leaders understand that profit is a measure of excellence, not its definition, and that the purpose of business is to serve genuine human needs in ways that enable everyone involved -- employees, customers, investors, communities -- to flourish.

Course Architecture¶

Business Ethics at IESE is structured as a three-part journey that mirrors the concentric circles of ethical responsibility: the individual decision-maker, the organization that shapes behavior, and the society in which both are embedded. The course rejects the notion that ethics is a secondary management consideration, treating it instead as the definitive dimension of human action, including all business decision-making. Two interlocking frameworks anchor the entire ten sessions. The first is the Three Lenses framework, which integrates utilitarian ethics (goods and consequences), deontological ethics (norms and duties), and virtue or character ethics (habits and personal development) into a single comprehensive approach to moral reasoning. The second is the See, Judge, Act framework, a practical decision-making cycle that moves from awareness and diagnosis, through moral evaluation, to concrete implementation. Every case in the course is analyzed through both frameworks simultaneously.

The course's deepest philosophical commitment is that business is, in itself, good -- an honest profession that contributes to human flourishing through efficient and innovative solutions to human needs, through the creation and distribution of economic value, and through professional relationships that enable personal growth. The ethical challenges arise not because business is inherently corrupt but because it is a demanding and technically complex environment, driven by strong incentives that are sometimes misleading, shaped by social norms that are sometimes at odds with moral principles, and populated by imperfect human beings who are susceptible to the allure of success, money, and social recognition. The course therefore positions the manager not as a rule-follower or a moral theorist but as a reformer: someone who is neither an idealist detached from reality nor a cynic who denies the existence of right and wrong, but rather a person who is aware of problems and develops viable strategies for change.

How It All Connects¶

The three parts of this course are not separate topics but concentric circles of the same question: how should I act? Part 1 (Personal Ethics) starts with the individual decision-maker -- your psychological makeup, your moral reasoning, and the frameworks you use to evaluate choices. This is the foundation, because no organizational policy or societal norm can substitute for personal character. Part 2 (Organizational Ethics) builds outward from the individual to the structures, cultures, and incentive systems that shape how groups of people behave inside companies. The key insight is that individual ethics and organizational ethics are not independent: even a person of strong character can be corrupted by a toxic culture, and even the best compliance program fails if the people implementing it lack judgment and integrity. Part 3 (Societal Ethics) completes the circle by asking what obligations companies owe to the broader communities in which they operate -- and what happens when they fail those obligations at scale. Each level depends on the ones beneath it: you cannot build an ethical organization without ethical individuals, and you cannot have ethical markets without ethical organizations. The course moves outward deliberately, so that by the time you reach the societal questions, you have the personal and organizational toolkit to engage them with rigor rather than slogans.

Part 1 -- Personal Ethics (Sessions 1 through 4)¶

Lesson 1: Introduction and Insider Trading¶

Case: Rajat Gupta [CASE-ONLY]

The opening session establishes the foundational premises of the course. Ethics is defined not as a set of abstract rules but as a branch of practical philosophy that guides human action toward the good life. The word itself derives from the Greek ethos, meaning habit or virtue, and this etymological root signals the course's orientation: ethics is fundamentally about what kind of person you are becoming through your decisions, not merely about whether any single decision passes a compliance test.

The session introduces two bedrock principles. The first is the natural-law principle of "do and pursue good and avoid evil," which the course treats as connatural to human beings -- not an external imposition but an internal orientation that all people share, however imperfectly they follow it. The second is the Golden Rule: "always treat others as you would want to be treated in the same situation." These principles function as pre-theoretical anchors; they are the intuitions that ethical theory attempts to refine and systematize.

The Rajat Gupta case provides the course's first encounter with a specific category of ethical violation: insider trading. The technical note on frequent ethical issues in business (BEN-144-E) classifies insider trading as trading securities using internal information that has not been publicly disclosed and that could substantially influence the price of securities. The course identifies four distinct reasons why insider trading is ethically unacceptable: it constitutes an act of unfair competition, a violation of fiduciary obligations, a breach of professional secrecy, and an erosion of the trust needed for securities markets to operate. The Gupta case asks students to reckon with the fact that a person of immense professional achievement and social standing -- the former managing director of McKinsey and Company, a board member at Goldman Sachs -- could engage in conduct that violated all four principles simultaneously.

The reusable principle is this: fiduciary duty is not merely a legal obligation but a moral one rooted in the trust that others place in you, and the misuse of confidential information for personal gain is a betrayal of that trust regardless of whether one is caught.

Lesson 2: Psychological Makeup and Fraud¶

Case: BOP Drilling [CASE-ONLY]

The second session turns inward, examining the psychological mechanisms that lead good people to make bad decisions. The course identifies a recurring pattern: ethical problems arise where there is pressure (internal or external), discretionary power to decide, and a culture that encourages the rationalization of inappropriate behavior. This is the fraud triangle adapted for ethical analysis.

The BEN-164-E note on personal ethics emphasizes that the primary source of ethical ambiguity is the tension between results (what we aim to achieve) and processes (how we achieve them). When pressure mounts, people do not typically leap from ethical behavior to outright fraud in a single step. Instead, problems tend to "escalate" -- small compromises accumulate, each one easier to rationalize than the last, until the person finds themselves far from where they intended to be. The course calls this the boiling-frog phenomenon, though it does not use that exact phrase: the damage happens gradually, and by the time the person recognizes the pattern, the sunk costs of prior compromises make it psychologically harder to reverse course.

The See, Judge, Act framework is applied for the first time in this session. In the SEE phase, students learn to recognize four components of ethical awareness. The first is awareness itself: recognizing that ethical issues are present, especially when they are not immediately obvious. The second is empathy: understanding the perspectives and experiences of others beyond quantitative and well-established criteria. The third is sensitivity to values: identifying the values and priorities at stake. The fourth is what the course calls thumb rules -- practical heuristics like "would I feel comfortable if this decision were public knowledge?" or "am I putting people first?" These thumb rules function as early warning systems, signaling when closer scrutiny is required.

The BOP Drilling case asks students to apply these diagnostic tools to a situation involving operational fraud. The reusable principle: ethical failures rarely begin with a dramatic decision to do wrong; they begin with small rationalizations ("everyone does it," "it is impossible to do otherwise," "the consequences are trivial") that accumulate into systemic misconduct.

Lesson 3: Ethical Philosophies and Corruption¶

Case: Voltium [CASE-ONLY]

The third session is the theoretical heart of the course, introducing the Three Lenses framework in full. The technical note BEN-157-E proposes that rather than choosing one ethical theory or another, the three major traditions should be integrated into a single proposal to achieve a comprehensive view of ethics.

The first lens is utilitarian ethics, which focuses on the goods obtained as a consequence of an action. Classical utilitarianism, as developed by Jeremy Bentham and John Stuart Mill, holds that actions are morally right if and only if they maximize pleasure or welfare and minimize suffering for the greatest number of people. In business, utilitarianism is the dominant theory and manifests through cost-benefit analysis. The course acknowledges the value of this perspective -- it focuses on consequences, identifies the variables that impact each stakeholder, and moves beyond abstract norms to ground-level analysis -- but also identifies three critical limitations. First, the arithmetic of the calculation is implausible: we cannot accurately predict all outcomes of all possible alternatives. Second, it is difficult to specify the pleasure or well-being that is intended to be maximized, since not everyone values the same things equally, making the calculation inherently subjective. Third, utilitarianism fails to protect minorities: those who do not benefit from the majority's calculation are disregarded, and their rights are overlooked. The paradigmatic business case of extreme utilitarianism is the Ford Pinto, where a company determined that the risk of potential compensation for deaths was cheaper than stopping production and repairing a known defect.

The second lens is deontological ethics, rooted in the work of Immanuel Kant. Deontology holds that we are morally obligated to act according to certain principles and rules regardless of the outcome. Kant's categorical imperative receives two formulations in the course. The universalizability formulation -- "act in such a way that the maxim of your will can always be valid at the same time as the principle of a universal legislation" -- establishes that ethical standards must hold universally across time and place. The humanity formulation -- "act in such a way that you treat humanity, whether in your own person or in the person of any other, never merely as a means to an end, but always at the same time as an end" -- establishes the equal dignity of all human beings and introduces the concept of rights. In business, deontologism manifests through codes of conduct, compliance programs, and the regulatory spiral of corporate governance. The limitation of deontology, taken alone, is that rules cannot cover every situation; a good decision requires discovering what makes each case singular, which depends on the judgment, sensitivity, and good habits that belong to the domain of virtue.

The third lens is character or virtue ethics, which focuses not on specific actions but on the subjects who perform them. Influenced by Greek Stoicism (Epictetus, Marcus Aurelius) and by Aristotle's concept of eudaimonia (human flourishing), virtue ethics takes a holistic approach, considering the totality of a person's life and patterns of behavior over time. It asks not "was this action right?" but "what kind of person am I becoming?" The limitation of virtue ethics, taken alone, is its flexibility: lacking precise guidelines for action, it can make it difficult to make decisions in ethically complex situations. The same action might qualify as generous or wasteful, as fortitude or rudeness, as loyalty or servility, depending on circumstances.

The course's central theoretical claim is that these three lenses are not competitors but complements. Goods, norms, and virtues are intrinsically related in the Aristotelian synthesis that the course adopts: goods need norms to be identified, norms need virtues to be concretized, and virtues need goods to be validated. The integration is captured in a set of diagnostic questions that students learn to ask for every case. For goods: What consequences can be expected? Is the end I am seeking good? What collateral effects are likely to occur? For norms: What are my principles? Is someone's right being infringed? Are there conflicts between rights? For virtues: What virtues and attitudes are encouraged or hindered? How will this action change me? How will others change?

The Voltium case applies this integrated framework to the problem of corruption. The BEN-144-E note defines bribery as giving cash, a gift, or some other form of benefit to obtain a partial judgment, vote, or certain behavior from someone in a position of trust, and extortion as demanding money or other gifts in exchange for favorable treatment. Both are classified as acts of injustice and disloyalty that spread a culture of corruption and work against the common good. The reusable principle: corruption is not merely a legal risk but a moral contagion that normalizes dishonesty, corrodes institutional trust, and ultimately undermines the conditions that make business itself possible.

Lesson 4: Ethical Decision-Making¶

Case: Uber [CASE-ONLY]

The fourth session synthesizes the personal-ethics arc by presenting a practical decision-making sequence that integrates all three lenses. The BEN-164-E note offers a seven-question protocol:

First, what do I want or what am I trying to achieve, and is it good or bad? Second, do I or others have any special responsibility in this matter that might prevent me from acting or obligate me to act? Third, excluding means that are intrinsically evil, what effective and efficient means could be used to achieve this end? Fourth, can I avoid or reduce the negative consequences, and are they proportionate? Fifth, what decisions would help me become the kind of person I want to be, in alignment with my ethical role models and values, and will I be setting a good example? Sixth, how would I view this decision if I were looking back on it from the moment of my death, and how would those who love me judge it? Seventh, how will this decision be perceived by people who do not have trust in me and could cause me difficulties, and how would I explain it in the newspapers?

This protocol embeds all three lenses: questions one through four address consequences and norms (utilitarian and deontological reasoning), question five addresses virtue and character development, and questions six and seven provide reality-testing heuristics that combine all three perspectives.

The session also addresses the crucial distinction between dilemmas and decisions. The course argues that ethics is more about preventing dilemmas from arising than about resolving them once they exist. A dilemma is a situation where no good solution exists; by that point, ethics has arrived too late. The real work of ethics is upstream: discerning right from wrong in general contexts and specific situations, evaluating decisions between different ways of doing good, and building the character that makes sound judgment possible.

The Uber case offers a vivid illustration of what happens when a corporate culture systematically privileges results over process, when pressure and discretionary power meet a culture of rationalization, and when the ethical escalation dynamic described in Session 2 operates at organizational scale. The reusable principle: the end does not justify any means, because some means are intrinsically evil or disproportionate; however, tolerating an evil to prevent greater evils is a different matter from actively doing evil, and this distinction between action and toleration is critical to sound ethical reasoning.

Part 2 -- Organizational Ethics (Sessions 5 through 7)¶

Lesson 5: Responsibilities to Employees, Gender, and Free Speech¶

Case: Google/Damore [CASE-ONLY]

The pivot to organizational ethics introduces a fundamentally different unit of analysis. The BEN-165-E note defines organizational ethics as centering on the structural and institutional dimensions of business ethics, which are critical because they shape social norms, hence normalizing conducts and influencing individual behavior. The key insight is that responsibility is not a zero-sum game: every individual is responsible for their own actions, but social structures and norms strongly influence what people want, how they reason, and how they act.

The session introduces a typology of responses to social norms within organizations. Most people are norm takers: they adhere to prevailing expectations. Some are norm breakers: they challenge established practices. A few are norm makers: they strive to create fairer and more effective norms. The course emphasizes that leaders bear particular responsibility for organizational ethics because human behavior is inherently mimetic -- people tend to imitate those who are most visible and exercise authority. Exemplary leadership is therefore not optional but structurally necessary.

The session identifies the key levers of organizational ethics. Formal rules define specific behaviors and related consequences; to be effective, they must be clear, address common problems, align with higher-level norms, and be applied consistently. However, no general rule can provide just solutions in every case, which is why organizational culture -- the set of informal norms, narratives, values, and symbols that establish behavioral expectations and foster a sense of belonging -- is equally important. Culture provides advantages such as fostering belonging, cohesion, and intrinsic motivation, but it also carries risks: ambiguity in information, unfair exclusion of individuals or groups, cognitive blindness, and resistance to change.

The course also examines the relationship between incentive structures and ethical behavior. Extrinsic incentives can produce unintended consequences, potentially leading to undesirable behaviors, which is why incentive structures must be designed to align precisely with the organization's purpose and objectives without undermining intrinsic motivation or distorting efforts to pursue less quantifiable goals.

The Google/Damore case applies these principles to the intersection of employee responsibility, diversity policy, and free speech within a corporation. The BEN-144-E note identifies discrimination (based on ethnicity, race, sex, gender, family, religion, or political views) as a form of distributive injustice, and also notes the problem of corporate culture and working atmosphere: organizations have ethical responsibilities that include acting with loyalty, diligence, efficiency, and fairness. The case forces students to confront the tension between an organization's duty to foster an inclusive workplace and an individual employee's claim to express dissenting views, asking whether and when speech within a corporate setting crosses from legitimate norm-breaking into conduct that undermines the organizational norms necessary for others to flourish.

The reusable principle: organizational ethics is not merely the sum of individual ethics; the structures, norms, incentives, and cultures that organizations create are themselves moral artifacts that shape behavior, and leaders who fail to attend to these institutional dimensions cannot absolve themselves of responsibility for the individual misconduct those structures produce.

Lesson 6: Responsibilities to Investors, Fraud, and Governance¶

Case: Theranos [CASE-ONLY]

The sixth session turns to the obligations that organizations owe to their investors and to the governance mechanisms designed to protect those obligations. The BEN-144-E note classifies the relevant ethical failures under two headings: fraud (including forgery -- faking invoices, filling in information on previously signed blank documents, materially altering existing documents) and violations of the principle that justice and honesty are crucial requirements in business. Justice is defined as a will to render to every person what is his or her due; honesty is defined as telling the truth in the right way to the right person at the right time.

The session also addresses the concept of moral hazard, defined as a situation in which an entity determines to assume risk while not bearing the entire costs of that risk. The technical note cites the bailouts of large financial institutions after the 2007-2008 financial crisis as a paradigmatic example, noting that when a party seeks their own interest at the other party's expense, even greater damage may be caused for both parties.

The Theranos case is the course's most vivid illustration of what happens when the tension between results and processes described in Session 4 is combined with the organizational dynamics described in Session 5. The case examines how a charismatic founder can build an organizational culture that systematically suppresses whistleblowing (the reporting of an organization's unethical practice by current or former employees, either within the organization or publicly), punishes norm-breakers, and rewards loyalty to the leader over loyalty to the truth. The BEN-144-E note recognizes that whistleblowing has ethical justifications in terms of the moral duty to prevent wrongdoing and to contribute to the common good, but also notes qualifications: using other channels before going public, and taking prudential considerations into account (personal safety, continuity of business, national security).

The session also examines the role of the board of directors as a governance mechanism designed to prevent exactly the kind of failure that Theranos represents. The regulatory spiral -- the pattern by which corporate scandals produce new regulations (such as independent director requirements) which then become the baseline for the next scandal -- illustrates the limits of deontological approaches to organizational governance. Rules alone cannot prevent misconduct if the culture that implements them is compromised.

The reusable principle: governance mechanisms are only as strong as the organizational culture in which they are embedded; a board of directors that lacks genuine independence, that defers to a charismatic CEO, or that fails to create channels for dissent is not merely ineffective but actively complicit in the outcomes it fails to prevent.

Lesson 7: Responsibilities to Customers and Virtue¶

Case: Terror at Taj Bombay [CASE-ONLY]

The seventh session completes the organizational-ethics arc by examining the obligations that organizations owe to their customers and, more broadly, the role of virtue at the organizational level. The BEN-144-E note identifies several categories of ethical obligations to customers. Consumer rights include the right to safety, the right of choice, the right to know, and the right to be heard. Integrity in sales requires that sales representatives navigate the tension between loyalty to the seller they represent and providing buyers with honest service. The note also addresses persuasion and manipulation, defining persuasion as overriding consumer autonomy by provoking desire in such a way that one of the necessary qualifying conditions of autonomy -- the possibility of deciding -- is eliminated, and identifying techniques such as subliminal advertising and the manipulation of children as ethically unacceptable.

The Terror at Taj Bombay case shifts the focus from the prevention of harm to the active pursuit of excellence. The case examines how ordinary employees of the Taj Mahal Palace Hotel in Mumbai, during the November 2008 terrorist attacks, chose to risk their own lives to protect hotel guests -- not because of any rule or compliance program, but because of deeply internalized organizational values that had been cultivated over years through hiring practices, training, mentorship, and a culture that genuinely treated service as a form of human excellence rather than a transactional obligation.

This case is the course's strongest argument for virtue ethics at the organizational level. No compliance manual covers what to do when terrorists storm your workplace. No cost-benefit analysis produces the decision to shield a stranger with your own body. What produced the Taj employees' conduct was character -- the kind of habitual orientation toward the good that Aristotle called eudaimonia and that the course translates as "having a good spirit." The employees had been formed by an organization that understood its purpose not merely as providing hospitality services but as cultivating the kind of people for whom extraordinary service was a natural expression of who they were.

The reusable principle: compliance systems and incentive structures are necessary but insufficient; the highest form of organizational ethics is the cultivation of character in every member of the organization, so that ethical behavior becomes not a response to external rules but an expression of internal formation.

Part 3 -- Societal Ethics (Sessions 8 through 10)¶

Lesson 8: Societal Role and Ethical Perspectives¶

Case: Purdue Pharma [CASE-ONLY]

The third part of the course widens the frame to the relationship between business and society. The BEN-166-E note observes that society is placing increasing and often conflicting demands on companies: it is no longer sufficient for them to offer goods and services at competitive prices. New actors, new issues, and new scenarios have emerged. The session applies the See, Judge, Act framework at the societal level. In the SEE dimension (descriptive), the question is: what is being asked of us, and what are the trends? In the JUDGE dimension (evaluative), the question is: regardless of what others think, what do we believe about our responsibility, and what is our purpose? In the ACT dimension (instrumental), the question is: how can we navigate the varied responses of our stakeholders, and how can we do business while doing what we believe is right?

The session introduces a four-level framework for clarifying the scope of a company's responsibility. The first level is legality: what does the law require? The course notes that legal requirements vary across jurisdictions and over time, that the law is intended to embody a sense of justice, and that judges often go beyond the letter of the law to achieve justice. The second level is legitimacy: what do different social groups demand to permit us to act? This varies across segments, and the decisive factor is the narrative framework the company establishes -- whether it positions itself as part of the problem or part of the solution. The third level is loyalty: how does the company specifically define its responsibility or purpose? The fourth level is personal: how do I, as a manager, define my responsibility?

The session also presents three main theoretical approaches to Corporate Social Responsibility (CSR). The shareholder model, proposed by Milton Friedman, holds that the responsibility of a corporate executive is to manage the company in accordance with the wishes of its owners, who typically aim to maximize profits while respecting basic legal and ethical standards. The model provides clarity in its objective and decision-making processes, guided by cost-benefit analysis, but risks overlooking or harming the interests of employees, communities, and the environment, and can justify opportunistic, unethical, or unsustainable behavior.

The stakeholder model posits that a company must consider the interests of all groups affected by its activities, including employees, customers, suppliers, and the broader community, with the goal of creating shared value. This model fosters a broader and more sustainable vision of business success, but it ignores the fact that some interests are neither measurable nor comparable, leaving managers without an explicit rational criterion to justify their decisions -- an ambiguity that can lead to arbitrariness and ideological fads.

The third approach, which the course identifies with IESE's own institutional ethos rooted in Christian social doctrine, views the company as a community of people working together toward common goals, contributing to the common good, and recognizing social responsibilities beyond economic results. In this view, companies are not conceived simply as transactional instruments for obtaining and distributing economic benefits. There is genuine, intrinsic common good in working together to serve others, which is the true purpose of a business, while still recognizing the importance of profit as a necessary means and measure of excellence. Employees work with managers and owners, not for them.

The Purdue Pharma case represents the darkest version of what happens when a company systematically fails at every level of this framework. The opioid crisis illustrates how a pharmaceutical company, by prioritizing shareholder value above all else, manipulated the medical profession and the public, suppressed evidence of addiction risks, and contributed to a public health catastrophe that has killed hundreds of thousands of people. The case forces a reckoning with the limits of the shareholder model, with the failure of legal compliance as a sufficient ethical standard (the company operated within the law for years while causing immense harm), and with the question of whether some products and business practices are so inherently destructive that they cross the absolute moral prohibitions the course identifies as red lines -- actions that violate human dignity regardless of consequences.

The reusable principle: a company that defines its responsibility solely through the lens of shareholder value maximization and legal compliance can inflict catastrophic harm on society while technically breaking no rules; the gap between legality and ethics is where the most dangerous corporate conduct lives.

Lesson 9: ESG and Stakeholder Capitalism¶

Case: New Belgium Brewing / B Corp [CASE-ONLY]

The ninth session examines the practical mechanisms through which companies attempt to institutionalize their societal responsibilities. ESG (Environmental, Social, and Governance) frameworks represent the most widely adopted attempt to operationalize stakeholder capitalism by providing standardized metrics for measuring a company's impact across three dimensions. The Environmental dimension encompasses ecological issues including global warming, pollution, biodiversity loss, the exploitation of natural resources, energy conservation, and the management of overproduction waste. The Social dimension addresses the company's relationships with employees (working conditions, diversity, health and safety), customers (product safety, data protection), suppliers (supply chain labor practices), and communities. The Governance dimension covers board composition, executive compensation, audit practices, transparency, and anti-corruption policies.

The course acknowledges the value of ESG frameworks while noting their limitations. The BEN-144-E note identifies greenwashing as the process by which businesses superficially present themselves as environmentally committed while not addressing the real issues, characterizing it as a form of manipulation that involves reputational risks and makes real change and innovation difficult. The BEN-166-E note warns more broadly that overly broad definitions of corporate responsibility can lead to inflated expectations, reputational risks, and potentially manipulative dynamics for employees. The course's position is that responsibility should be defined with the common good in mind and aligned with the operational activities inherent to an organization's role; it should leverage an organization's unique strengths to identify and address problems effectively, be delineated territorially, and involve partnerships with specific communities. Rather than attempting to tackle every issue, organizations should proactively focus on representative "battles."

The session also examines alternative legal frameworks that attempt to enshrine ethical commitments into corporate structure. B Corporations (Benefit Corporations) are companies that have legally committed to considering the impact of their decisions on all stakeholders, not only shareholders. Other frameworks include cooperatives, the German co-determination model (which gives employees representation on corporate boards), and the French entreprise a mission. The BEN-166-E note observes that these frameworks do not adequately address all circumstances or preclude conflicts, and that merely complying with the law -- even a law specifically designed to promote stakeholder interests -- is never enough; governance must remain focused on the ends a company pursues, not just the means it employs.

The concept of Creating Shared Value (CSV), developed by Michael Porter and Mark Kramer, is also relevant here. Porter and Kramer argue that the purpose of the corporation must be redefined around creating shared value -- generating economic value in a way that also creates value for society by addressing its needs and challenges. This concept bridges the shareholder and stakeholder models by arguing that social impact and competitive advantage are not trade-offs but mutually reinforcing objectives. The three avenues for creating shared value are reconceiving products and markets, redefining productivity in the value chain, and enabling local cluster development.

The New Belgium Brewing / B Corp case provides a concrete illustration of a company that has attempted to institutionalize stakeholder capitalism through both cultural practices and legal structure. The reusable principle: ESG metrics, B Corp certification, and other structural mechanisms are valuable tools for accountability and transparency, but they are means, not ends; the true test of a company's ethical commitment is not whether it has adopted the right framework but whether its leaders have the character and the organizational culture to pursue the common good even when doing so is costly, ambiguous, or unpopular.

Lesson 10: Technology, AI, and Ethics¶

Case: AI Pyramid / Pollos Pujante [CASE-ONLY]

The final session brings the course's frameworks to bear on the newest frontier of business ethics: the challenges posed by technology and artificial intelligence (AI). The BEN-144-E note identifies several categories of ethical concern in technological innovation. Data protection has become increasingly critical as improvements in technology make it easier for employers to monitor workers and customers in ways that invade personal privacy; the note characterizes electronic surveillance without knowledge and consent as unjust. E-commerce raises issues of customer privacy and security, including the risk that sensitive data may be stolen or sold. The political disturbance dimension addresses the ability of large technology companies to influence governments regarding regulations and taxes, and to shape public opinion; the note observes that a lack of legal regulation enhances the advantage of innovative companies but does not authorize them to act irresponsibly. Cultural distortion refers to the immense power of technological prescription wielded by tech leaders and companies, who project their own biases and assumptions, shaping lifestyles and creating business expectations in ways that can be harmful.

The session also addresses the specific ethical challenges of artificial intelligence. AI systems raise questions across all three lenses simultaneously. Through the utilitarian lens, the key questions concern consequences: who benefits from algorithmic decision-making, who is harmed, and how do we measure and compare these impacts when the algorithms are opaque? Through the deontological lens, the questions concern rights and duties: does automated decision-making respect human dignity, does it treat people as ends rather than merely as means, and what happens to accountability when decisions are made by machines? Through the virtue lens, the questions concern character: what kind of organizations and societies are we building when we delegate moral judgment to algorithms, and what happens to human judgment and practical wisdom when they are no longer exercised?

The BEN-144-E note's discussion of the unchecked social and cultural power of business -- particularly big tech companies owning social media -- as a challenge to truly democratic political procedure resonates powerfully in the AI context. The proliferation of fake news, rumors, and clickbait, which the note characterizes as undermining the credibility of media and the quality of public opinion, is compounded by AI systems that can generate misinformation at scale, personalize manipulation, and make it increasingly difficult to distinguish between authentic and synthetic content.

The AI Pyramid / Pollos Pujante cases ask students to apply the full course toolkit to these challenges. The reusable principle: technology amplifies both human capacity for good and human capacity for harm; the ethical frameworks developed for traditional business decisions -- the integration of consequences, rules, and character; the See, Judge, Act cycle; the reformer's commitment to viable strategies for change -- are not obsoleted by technological innovation but are more necessary than ever, precisely because the speed, scale, and opacity of technological systems reduce the time available for ethical reflection while increasing the stakes of ethical failure.

Core Frameworks Summary¶

The Three Lenses (BEN-157-E)¶

The integrated ethical analysis framework treats utilitarian, deontological, and virtue ethics not as competing theories but as complementary perspectives that must be used together. Utilitarian ethics asks "what consequences will this produce?" and is embodied in business through cost-benefit analysis; its strength is practical grounding, its weakness is the inability to protect minority rights. Deontological ethics asks "what rules or duties apply?" and is embodied through codes of conduct and compliance programs; its strength is clarity and universality, its weakness is rigidity in novel situations. Virtue ethics asks "what kind of person am I becoming?" and is embodied through character development and organizational culture; its strength is flexibility and holistic perspective, its weakness is lack of precise action guidance. The course's Aristotelian synthesis holds that goods need norms to be identified, norms need virtues to be concretized, and virtues need goods to be validated.

See, Judge, Act (BEN-148-E)¶

The practical decision-making framework is an iterative cycle, not a linear sequence; each step informs and reinforces the others. SEE (the descriptive perspective) develops awareness, empathy, sensitivity to values, and practical heuristics. JUDGE (the normative perspective) draws on moral traditions, ethical theories, moral expertise, personal and organizational principles, moral absolutes (non-negotiable red lines such as respect for human dignity and the prohibition of corruption), and dialogue with stakeholders. ACT (the instrumental perspective) encompasses five modes of action: prevent (anticipating ethical risks), resist (standing firm against unethical pressure), denounce (exposing unethical conduct), propose (offering constructive alternatives), and impose (enforcing ethical standards through policies and sanctions).

The Reformer Stance¶

The course's aspirational model for the ethical manager is the reformer, who applies ethics beforehand to SEE (whether the organization is aligned with their values and to understand the cultural or other underlying causes of problems), JUDGE (without being swayed by self-interest or by what everyone else is doing), and ACT with a strategic mindset, which means generating resources and support to strengthen negotiating power and create alternatives.

Shareholder versus Stakeholder versus Community¶

The three models of corporate purpose form a spectrum. The shareholder model (Friedman) offers clarity but risks ethical narrowness. The stakeholder model offers breadth but risks ambiguity. The community model (IESE / Christian social doctrine) sees the company as a community of persons pursuing a genuine common good through service, with profit as a necessary means and measure of excellence rather than an ultimate end.

Common Ethical Traps in Business (BEN-144-E)¶

The course catalogs ethical risks across nine functional areas: people in organizations (corruption, workplace violence, harassment, discrimination, exploitative labor, whistleblowing); procurement and commercial (bribery, conflicts of interest, contract misbehavior, misappropriation, embezzlement); finance, accounting, and control (insider trading, moral hazard, trade secret violations, forgery, tax evasion, tax havens); marketing and advertising (consumer rights violations, integrity in sales, unfair competition, paternalism, persuasion and manipulation); production and supply chain (worker safety, product defects, environmental exploitation, counterfeiting, predatory pricing, outsourcing to sweatshops); negotiation (lying, bluffing, lack of truthfulness about goods); communications and public affairs (lack of transparency, stakeholder relationship failures, lobbying and cronyism, political activism, fake news); technological innovation (data protection violations, e-commerce fraud, political disturbance, cultural distortion); and sustainability and social responsibility (ecological damage, greenwashing, failure to contribute to the common good).

Connecting Threads Across the MBA Curriculum¶

Business Ethics is not a standalone discipline but a lens that refracts every other course in the MBA program.

The connection to Leadership is the most direct. Organizational culture, which Leadership treats as the context for motivation and team performance, is treated in Business Ethics as a moral artifact -- a structure that normalizes certain behaviors and suppresses others, for which leaders bear particular responsibility. The trust that Leadership identifies as the foundation of effective authority is, in ethical terms, a form of fiduciary duty that extends to every person in the organization. The talent development practices that Leadership examines as tools for professional growth are, ethically, instruments for the cultivation of virtue.

The connection to Corporate Finance runs through governance and agency theory. The principal-agent problem that Corporate Finance treats as a structural feature of the modern corporation is, in ethical terms, a problem of fiduciary duty and trust. The governance mechanisms that Corporate Finance examines (board independence, executive compensation design, shareholder rights) are, in the ethical framework, attempts to institutionalize deontological safeguards against the misalignment of interests. The shareholder value maximization that Corporate Finance takes as its default objective is, in Business Ethics, only one of three possible models of corporate purpose, and not the most ethically complete one.

The connection to Competitive Strategy appears through stakeholder theory and CSR. The industry analysis frameworks that Competitive Strategy provides (Porter's Five Forces, value chain analysis) are ethically relevant because they identify the structural pressures that create incentives for unethical behavior: intense rivalry may tempt companies toward predatory pricing or deceptive advertising; supplier power imbalances may enable exploitative labor practices; customer vulnerability may invite manipulation. The concept of Creating Shared Value, which originated in the strategy literature, represents an explicit attempt to reconcile competitive advantage with social responsibility. ESG integration is increasingly relevant to competitive positioning, as companies that fail to manage environmental and social risks face regulatory penalties, reputational damage, and loss of access to capital.

Quick Reference¶

1. See, Judge, Act -- The practical decision-making cycle: diagnose the situation (SEE), evaluate it ethically (JUDGE), implement a response (ACT). Iterative, not linear.
2. Three Lenses -- Integrate utilitarian ethics (consequences), deontological ethics (rules and duties), and virtue ethics (character) into a single analysis. Never rely on just one.
3. Stakeholder Theory -- A company must consider the interests of all groups affected by its activities (employees, customers, suppliers, communities), not only shareholders.
4. Shareholder Model (Friedman) -- The responsibility of a corporate executive is to maximize profits while respecting basic legal and ethical standards. Clear but ethically narrow.
5. Community Model (IESE) -- The company as a community of persons pursuing genuine common good through service, with profit as a necessary means and measure of excellence.
6. Categorical Imperative -- Kant's two formulations: act only on maxims you could universalize; treat humanity never merely as a means but always also as an end.
7. The Reformer Stance -- The ethical manager is neither an idealist detached from reality nor a cynic who denies right and wrong, but someone who sees problems and develops viable strategies for change.
8. Ethical Escalation -- Small compromises accumulate; each rationalization makes the next one easier, until the person is far from where they intended to be.
9. Fraud Triangle -- Ethical problems arise where pressure, discretionary power, and a culture of rationalization converge.
10. Moral Hazard -- A situation in which an entity assumes risk while not bearing the entire costs of that risk, creating incentives for reckless behavior.
11. Creating Shared Value (CSV) -- Porter and Kramer's argument that economic value and social value are mutually reinforcing, not trade-offs.
12. ESG (Environmental, Social, Governance) -- Standardized metrics for measuring corporate impact across ecological, social, and governance dimensions.
13. Whistleblowing -- Reporting an organization's unethical practices, justified by the moral duty to prevent wrongdoing and contribute to the common good.
14. Greenwashing -- Superficially presenting a business as environmentally committed while not addressing real issues; a form of manipulation.
15. Four Levels of Responsibility -- Legality (what the law requires), legitimacy (what society demands), loyalty (how the company defines its purpose), personal (how the manager defines their responsibility).

Glossary¶

Bribery -- Giving cash, gifts, or other benefits to obtain a partial judgment, vote, or favorable behavior from someone in a position of trust.

Categorical Imperative -- Immanuel Kant's foundational moral principle, expressed in two formulations: universalizability (act only on rules you could apply to everyone) and humanity (never treat people merely as tools for your own purposes).

Common Good -- The set of conditions in society that enable individuals and groups to flourish; in the course's framework, the ultimate purpose that business activity should serve.

Compliance -- The system of rules, monitoring, and enforcement mechanisms designed to ensure that an organization follows legal and ethical standards. Necessary but insufficient on its own.

Corporate Social Responsibility (CSR) -- The broad category of theories and practices addressing a company's obligations beyond profit maximization, including environmental stewardship, community engagement, and stakeholder welfare.

Creating Shared Value (CSV) -- A concept developed by Michael Porter and Mark Kramer arguing that companies can generate economic value while simultaneously addressing social needs, through reconceiving products, redefining productivity, and enabling local clusters.

Deontological Ethics -- The ethical tradition rooted in Kant that holds we are morally obligated to act according to certain principles and rules regardless of outcomes. In business, it manifests through codes of conduct and compliance programs.

ESG (Environmental, Social, Governance) -- A framework of standardized metrics for evaluating a company's performance and risk across ecological impact, social relationships, and governance practices.

Ethical Escalation -- The pattern by which small moral compromises accumulate over time, each easier to rationalize than the last, until the person or organization has drifted far from ethical conduct.

Eudaimonia -- Aristotle's concept of human flourishing or "having a good spirit"; the goal of virtue ethics, achieved through habitual orientation toward the good across the totality of one's life.

Extortion -- Demanding money or other benefits in exchange for favorable treatment; classified in the course as an act of injustice that spreads a culture of corruption.

Fiduciary Duty -- The moral and legal obligation to act in the best interests of another party who has placed trust in you, such as a board member's duty to shareholders or a manager's duty to the organization.

Fraud Triangle -- The convergence of pressure (internal or external), discretionary power, and a culture of rationalization that creates conditions for ethical failure.

Golden Rule -- "Always treat others as you would want to be treated in the same situation." One of the course's two bedrock pre-theoretical principles.

Greenwashing -- The practice of superficially presenting a business as environmentally committed without addressing real environmental issues; a form of reputational manipulation.

Insider Trading -- Trading securities using non-public internal information that could substantially influence the price of those securities. Ethically unacceptable as unfair competition, breach of fiduciary duty, violation of professional secrecy, and erosion of market trust.

Mimetic Behavior -- The human tendency to imitate those who are most visible and exercise authority; the reason why leadership example is structurally necessary for organizational ethics.

Moral Hazard -- A situation in which one party assumes risk while another party bears the costs, creating incentives for the risk-taker to behave recklessly.

Natural-Law Principle -- "Do and pursue good and avoid evil." The course treats this as connatural to human beings -- an internal orientation, not an external imposition.

Norm Breaker -- A person who challenges established practices within an organization, as opposed to a norm taker (who follows prevailing expectations) or a norm maker (who creates new, fairer norms).

Organizational Culture -- The set of informal norms, narratives, values, and symbols that establish behavioral expectations and foster a sense of belonging within an organization. Treated in the course as a moral artifact.

Persuasion (unethical) -- Overriding consumer autonomy by provoking desire in a way that eliminates the possibility of free decision, including subliminal advertising and manipulation of children.

Reformer -- The course's aspirational model for the ethical manager: someone aware of problems who develops viable strategies for change, applying ethical reasoning before, during, and after decisions.

Regulatory Spiral -- The recurring pattern by which corporate scandals produce new regulations, which become the baseline for the next scandal, illustrating the limits of rules-based approaches alone.

See, Judge, Act -- The course's practical decision-making cycle. SEE develops awareness, empathy, and sensitivity to values. JUDGE draws on moral traditions, principles, and absolutes. ACT encompasses preventing, resisting, denouncing, proposing, and imposing.

Stakeholder Model -- The view that a company must consider the interests of all groups affected by its activities, aiming to create shared value. Broader than the shareholder model but risks ambiguity in prioritization.

Three Lenses -- The course's integrated framework combining utilitarian ethics (goods and consequences), deontological ethics (norms and duties), and virtue ethics (habits and character) into a single comprehensive approach.

Thumb Rules -- Practical heuristics for ethical early warning, such as "would I feel comfortable if this decision were public knowledge?" or "am I putting people first?"

Utilitarianism -- The ethical tradition developed by Jeremy Bentham and John Stuart Mill holding that actions are morally right if they maximize welfare for the greatest number. Dominant in business through cost-benefit analysis, but unable to protect minority rights.

Virtue Ethics -- The ethical tradition influenced by Aristotle and the Stoics that focuses not on individual actions but on the character of the person performing them, asking "what kind of person am I becoming?" rather than "was this action right?"

Whistleblowing -- The reporting of an organization's unethical practices by current or former employees. Ethically justified by the duty to prevent wrongdoing, but qualified by prudential considerations including using internal channels first.