Mr. Krabs mainly operates in the 1st stage of moral development, although he understands the ideas of the 2nd stage, and on at least one occasion has shown ability to reach the 3rd level. He is smarter than Spongebob and Patrick, so he is cognitively more prepared to be at a higher level of moral development.
In The Sponge Who Could Fly, Spongebob gains the ability to fly and becomes superhero-like. Mr. Krabs sees Spongebob flying about doing good deeds and decides to take advantage of him. Mr. Krabs makes Spongebob clean his garage.
In Born Again Krabs, Mr. Krabs is sent to the hospital after trying to consume an old Krabby Patty found behind the fryer so as not to waste it. While he is in the hospital, the Flying Dutchman comes to Mr. Krabs, saying his life is over and he is taking him to Davey Jones' Locker. Mr. Krabs begs the Flying Dutchman for a second chance, and he grants it to him, as long as he's not cheap. After returning to the Krusty Krab, Mr. Krab says, "My whole life has been about money, but not anymore." He becomes incredibly generous, handing out free toys and refills and food. When he is questioned by Spongebob about his odd behavior, he answers him with, "It's all a bad dream -- I'm still in the hospital, asleep." Upon realizing that he is actually awake, Mr. Krabs freaks out and becomes his cheap self again within seconds. The Flying Dutchman then returns, saying Mr. Krabs violated the agreement to not be cheap, citing that he had just almost torn a fish's arm off for a penny. He is threatened with eternity in Davey Jones' Locker, and is then offered a choice: sell Spongebob's soul to be put in Davey Jones' Locker instead, and then Mr. Krabs would also get to keep 62 cents. If Mr. Krabs refused the 62 cents, Spongebob would be safe. Of course, Mr. Krabs opted to keep the 62 cents, a perfect example of his moral development in the 1st stage. He later apologizes to Spongebob, but Spongebob looks at the situation more maturely. He says that Mr. Krabs did it for the Krusty Krab (which had made no money that day).
In Nasty Patty, a health inspector visits the Krusty Krab. After hearing of a fake inspector going around Bikini Bottom, Mr. Krabs and Spongebob play a prank on the real inspector. When they think they have killed him, the go off to bury the body while avoiding the cops. This shows Mr. Krabs' low level of moral development.
In the episode called Bossy Boots, Mr. Krabs gives Pearl a summer job at the Krusty Krab. Her ideas to make it more of a fun hangout are very expensive and go against the theme of the original retaurant. Mr. Krabs is very upset about the amount of money Pearl is costing him, but he is more worried about hurting Pearl's feelings if he told her her ideas were bad and wasteful. This is one of the only examples where Mr. Krabs comes anywhere near close to the 3rd stage.
