Three Sources of Moral Obligations: The Root of Business Ethics

Updated December 13, 2017

Duty: The Root of Ethics

A duty is an obligation to act in a certain way. Though duties arise from various sources, all duties have a moral dimension. Duties create obligations and expectations. Companies, for example,  have many duties including an obligation to treat customers and employees fairly, to assure that their products and services are safe and effective, and to abide by the law. Those affected by a company’s actions have a right to expect these duties to be fulfilled.

Prohibitions and Requirements. There are two basic forms of duty; prohibitions and mandates. Prohibitions specify things we may or should not do. They are “don’ts”, as in don’t lie, cheat, or steal. Requirements, on the other hand, are mandates specifying things we must or should do. The ‘dos” include be kind, be fair and be respectful.

Sources of Moral Obligation

Moral obligations arise from three sources: laws, promises and principles.

1. Law-Based Moral Obligations. Good citizens have a moral as well as a legal obligation to abide by laws; it is part of the assumed social contract of a civilized society. In fact, many laws simply codify  ethical standards of conduct fundamental to healthy social relations and effective commerce. For example, the general moral duty to not harm others are embodied in criminal and civil laws prohibiting homicide, assaults, drunk driving, and other dangerous behavior. Similarly, the ethical duty to be honest is enforceable by laws forbidding perjury, forgery, fraud, and defamation among others. Though many forms of dishonesty are not illegal, the moral duty to be honest should be enough to restrain an honorable person.

When a moral duty is translated into a legal obligation it is enforceable by courts of law. Thus, one who fails to live up to a legal duty we can be criminally prosecuted or sued. On the other hand, the consequences for breaching a moral duty is blame and condemnation — and, if one has a well developed conscience, feelings of guilt and shame leading to remorse. Legal duties are created by federal, state and municipal laws as well as regulations promulgated by government agencies. Company policies have a similar effect on those bound by them.

2. Promise-Based Moral Obligations. The second source of moral obligation is based on a promise or agreement. While not all promises reach the level of an enforceable contract, honorable people and companies recognize and fulfill the oral obligation to do the things they agreed to do, especially if others are counting on them to do so. When we borrow money, promising to pay it back in a week, or tell a friend we will pick her up at the airport, or take a job involving the supervision of other employees, we undertake a moral duty to do what we say we will do and to dutifully perform the responsibilities encompassed in our promises.

Though from an ethical perspective there is no doubt that we have a moral obligation to keep our promises, many people in business and politics do not accept this moral duty. instead, they believe that it is proper, maybe even wise, to do whatever one can get away with. Consequently, a great many lawyers and executives think of their contractual obligations and other commitments purely in terms of economic impact. This leads to a belief that in business one has a right to breach a promise so long as he or she is willing to pay for any damages caused. The moral obligation to keep one’s word is treated as an irrelevant sentimentality.

Unfortunately, this is not just an academic theory; it is an operational philosophy in much of the business world. It is also evident in the sports and entertainment worlds, where “renegotiating” contracts has become commonplace. Though such conduct clearly involves breaking a promise (and may even be a form of extortion: “Pay me more or I walk”), many athletes and their agents seems to have no moral inhibitions about demanding a better deal. The notion of honor seems to have no place in transactions involving something they evidently value more — money.

While conducting a workshop on corporate values for senior executives of a Fortune 100 company, I once suggested that promise-keeping was a central aspect of trustworthiness, that there is an ethical as well as a legal responsibility to keep commitments. The company’s legal counsel objected strenuously. “Hold on!” he said. He explained that whether the company decides to live up to an agreement is a business decision with no ethical dimension. It was the company’s right, and perhaps its obligation to the shareholders, he said, to evaluate whether it was in the company’s best interests to breach contracts that have become unwise or unprofitable. He acknowledged that decisions to disavow an agreement should be rare because of its negative impact on trust, but he insisted, the choice to keep a promise or not should should be based on a simple cost/benefit analysis. Morality is not an issue.

This legalistic, expediency-oriented attitude is a perfect illustration of the dangers, and in my view the fallacy, of trying to separate business and personal ethics. The standards of trustworthiness and honor do not change the moment one enters corporate headquarters.

3. Moral Principle as the Basis of Moral Obligation. The third source of moral obligation is moral principle, a standard of conduct that exists irrespective of laws or agreements. The great German ethicist, Immanuel Kant, expressed the power of moral principle when he said, “Two things fill my mind with ever-increasing wonder and awe: The starry heavens above me and the moral law within me.”

Moral principles can be mandated by religious doctrine or derived through rational philosophical reasoning. In some cases, principles such as justice and benevolence simply emerge as the result of an intuitive moral sense. Whatever their source, however, such principles are at the very core of ethics.

If a duty arising from a moral principle conflicts with duties imposed by law or undertaken by agreement, the duty based on principle should prevail. In other words, if abiding by a law or living up to a contract requires dishonest or disrespectful conduct that violates my core moral principles, as an ethical person I must honor the principles even if it means being prosecuted or sued. Such decisions, however, must be made cautiously and with due recognition of the ethical implications of breaking laws and breaching contracts. The moral principles of trustworthiness and citizenship establish a very strong presumption that laws should be obeyed and commitments should be kept.