CMA Intermediate · Business Laws and Ethics

Business Ethics and Emotional Intelligence: formula sheet

Full chapter guide

Key formulas

Ethics vs morals: Morals = personal, internal beliefs; Ethics = shared, external standards of a group or profession; Morals guide the individual. Ethics guide conduct in a defined setting such as a business or profession.
Ethics vs law: Law = mandatory, State-made, enforced by penalty; Ethics = largely voluntary, enforced by conscience and society; An act can be legal but unethical, or (rarely) ethical but not legal. Law sets the minimum; ethics often asks for more.
Scope memory line: Marketing, Finance, HR, Operations, Competitors, Environment, Governance; Use these as headings when asked for the scope of business ethics.
Importance memory line: Trust, Reputation, Morale, Compliance, Long-term profit, Society; Six quick points for an importance answer. Add one example each.
Utilitarianism (teleological): Right action = action producing the greatest good for the greatest number; Tests: consequences. Weakness: may harm a minority.
Deontology: Right action = action that follows duty, rules and rights, regardless of consequences; Tests: duty and principle. Weakness: rigid; duties may conflict.
Virtue ethics: Right action = what a person of good character would do; Tests: character, such as honesty, courage, integrity.
Justice: Right action = fair treatment, fair distribution and fair procedure; Tests: fairness to all affected.
Teleological vs deontological: Teleological = ends justify the act; Deontological = the act itself must be right; The most common comparison asked.
Ethical dilemma test: Ethical dilemma = conflict of values or duties + no option without a moral cost; Use this to separate a dilemma from a simple breach of law or an ordinary business decision.
Sources of ethical issues: Individual + Organisational + Leadership + External; A handy grouping for any question asking why unethical behaviour arises.
Resolution sequence: Facts → Stakeholders → Options → Test → Decide → Review; A six-stage framework you can adapt to any case study.
Common tests of an option: Legal? Fair? Transparent? Would I be comfortable if it were made public?; Quick checks to screen options. Legality is necessary but not sufficient.
Promoting ethics at work: Code + Training + Leadership example + Reporting channel + Consistent enforcement; Use as the structure for answers on building an ethical workplace.
Ethical business framework: Code of ethics + Ethics committee + Whistleblowing channel + Leadership example + Training and enforcement = Ethical culture; Use this as an answer skeleton. Each part supports the others.
Ethics and governance link: Ethics = values; Governance = structure to apply and enforce those values; State this line when asked about the relationship between the two.
Features of an effective code: Clear, specific, applies to all, communicated, enforced, reviewed; Six points are easy to recall and score.
Features of a sound whistle blower policy: Easy reporting channel + confidentiality + protection from retaliation + fair investigation + timely action; Add access to the audit committee chairperson where your material says so.
Definition of EI: EI = recognising + understanding + managing own emotions and others' emotions; Use this as your opening line in any definition question.
Goleman's five components: Self-awareness, Self-regulation, Motivation, Empathy, Social skills; Learn in this order. First three are personal competence, last two are social competence.
Self-awareness: Knowing your own emotions, strengths, weaknesses, values and their effect on others; Includes honest self-assessment and self-confidence.
Self-regulation: Controlling or redirecting disruptive impulses and moods; thinking before acting; Linked to trustworthiness, integrity, adaptability.
Motivation: Inner drive to achieve for its own sake, not only for money or status; Shows as optimism, commitment and initiative.
Empathy: Understanding the emotional make-up of other people and treating them accordingly; Not the same as sympathy or agreeing with them.
Social skills: Managing relationships, building networks, finding common ground, influencing and resolving conflict; Includes communication, teamwork and leadership.
IQ vs EQ: IQ = cognitive and analytical ability; EQ = emotional and interpersonal ability; EQ can be improved with learning and practice.

Quick revision

Ethics deals with right and wrong conduct; law sets the minimum enforceable standard.
Something can be legal and still be unethical, so test both.
Know each ethical theory by name, core idea and one business example.
An ethical dilemma is a choice between options where each has a cost or conflicts with a value.
In a case, first identify who is affected, then apply a principle, then recommend an action.
A code of ethics states expected conduct; it works only if leaders follow it and breaches have consequences.
Ethical culture is built by tone from the top, clear policies, training and safe reporting channels.
Good governance supports transparency, accountability and fair treatment of stakeholders.
Emotional intelligence is recognising and managing your own and others' emotions.
Learn the components of emotional intelligence in the order your study material gives them.
Self-awareness and self-regulation help you pause before reacting to pressure.
Empathy helps you weigh the impact of a decision on others.

Common mistakes

Treating ethics, morals and law as the same thing Fix: Always state source, enforcement and penalty. Law is State-enforced with penalty. Morals are personal. Ethics are shared standards.
Saying that whatever is legal is ethical Fix: Say that law sets the minimum standard. Give an example such as a misleading but technically legal advertisement.
Treating utilitarianism as deontological, or the reverse Fix: Link utilitarianism to outcomes and deontology to duty. Remember: deontology = duty.
Saying ethics is the same as law Fix: State that an act can be legal but unethical, and law is only the minimum standard.
Treating legal as the same as ethical. Fix: State that law sets the minimum. Add a test for fairness, honesty and harm to stakeholders.
Giving a one-line verdict without reasoning. Fix: Show the steps: dilemma, stakeholders, options, decision and reason. Marks go to the reasoning.
Treating a code of ethics as a legal document only Fix: Say a code goes beyond law. It sets values and expected behaviour, and covers areas the law does not.
Saying a code alone creates an ethical culture Fix: Add leadership example, training, reward systems and enforcement. Culture is what people do, not what is written.
Mixing up self-awareness and self-regulation. Fix: Self-awareness is knowing the emotion; self-regulation is controlling your response to it.
Treating empathy as sympathy or agreement. Fix: Empathy is understanding another person's feelings and viewpoint. You need not agree or feel sorry for them.

Exam tips

Expect the MCQ to test the difference between ethics, morals and law. Remember: law is mandatory and State-enforced; ethics and morals are not.
In written answers, use headings and short points. Step marks go to clear structure, not length.
Add one business example to each major point. It separates a good answer from a bookish one.
For 'distinguish' questions, use at least four bases of difference in a two-column layout.
Do not quote a case or statute for this topic unless you are sure of it. Clear reasoning earns the marks.
Learn one-line definitions and one example for each of the four theories; short notes are often asked.
For comparison questions, use a two-column style in lines: basis, teleological, deontological.
In case questions, name the theory, apply it to the facts and give a final decision. This earns step marks.