TOPIC 1: ETHICS AND ITS SIGNIFICANCE IN John Stuart Mill (English philosopher)

THE BUSINESS DISCIPLINES • Goal of life is to maximize happiness

(physical & psychological) and to
Ethics minimize unhappiness.
1. A general pattern or ‘way of life’. • The goal of the society is to maximize the
2. A set of rules of conduct or moral code social benefits to all people.
of conduct. • This theory implies that the goal of a
3. Inquiry about ways of life and rules of business is to contribute to increasing the
conduct. physical and or psychological benefits to
society.
Morality or Moral Codes • This does not mean the goal of a
1. Beliefs about nature of man. business is to maximize profit; but
2. Beliefs about ideals, what is rather to contribute to the overall good
good/desirable/worthy of pursuit for its of society.
own sake.
3. Rules laying down what ought to be John Rawls (American philosopher)
done/not to be done. • Introduces the theory of justice.
4. Motives that incline us to choose/wrong • Society should be structured, so a fair
course. distribution of rights and benefits and
that any inequalities should be to
Aristotle (Greek Philosopher) everyone’s advantage.
• The goal of life is happiness. • This implies that businesses act in an
• Happiness is achieved by leading a ethical manner when:
virtuous life in accordance with reason. • No price discrimination & hiring
• The virtues include integrity, honor, systems.
loyalty, courage, and forthrightness. • Not to provide goods and services
• In business sense, the above means, to one segment of society at the
directors, executives, and accountants expense of other segment of
should demonstrate integrity in business society.
dealings, should honor the terms of • No polluting & exploiting.
contracts, should be loyal to employees,
customers, and suppliers, should have the Ethical Dilemma Case Analysis
courage to be transparent and should be 1. Key facts.
forthright when providing explanations 2. Key factors.
of good and bad business behaviors. 3. Key players.
4. Whistle-blower.
Immanuel Kant (German philosopher) 5. Stakeholders.
• People are ethical when they do not use 6. Interest of stakeholders.
other people opportunistically and when 7. Issues.
they do not act in a hypocritical manner 8. Ethical dilemma.
demanding a high level of conduct for 9. Ethical decision.
everyone else while making exceptions for
themselves. Reasoning Process
• Businesses should never treat employees, The benefit if proceed The burden if proceed
customers, suppliers merely as a means, with decision. with the decision.
exploiting them for short-term goal. The benefit if does The burden if does
not proceed with the not proceed with the
decision. decision.
Final ethical decision is………..

Zieqah Fauzay
:P
 TOPIC 2: ETHICAL THOUGHT & MORAL
REASONING IN BUSINESS
1. Physical
Factors (Environmental
affecting concerns) for
public expectation
2. Sense of morality
business
3. Bad judgement
4. Activist stakeholders
5. Economic pressure
6. Competition
7. Financial malfeasances
8. Governance failures
9. Accountability
10.Synergy among factors
11.Institutional reinforcement
Theory of Profit by Milton Frie
A corporate executive has the
responsibility to make as much money as
possible while conforming to the basic rules of
society, both in law and in ethical customs.
Critical issues:
1. If you were to deviate from just
concentrating on profit, it does not
mean profit will decline.
2. Profit alone is an incomplete measure
of corporate performance.
3. In making profit, the expected
performance must be within the law
and ethical custom.
Moral standard
• Rules in common with every society
because they are necessary for society
to exist.
• Generally acceptable based on your
culture, race, religion.
Legal standard
• Systems of incentive and punishment to
be enforced based on regulations, law,
rules.
Velasquez Modified Moral Standards
• Whether the decision will provide benefits
to the society? (Well-offness)
• Whether the decision is fair to all
stakeholders? (Fairness)
• Whether the decision will offend the
rights of the decision-maker and
stakeholders? (Rights)
• Whether the decision demonstrate the
virtues expected by stakeholders? (Good
Values)
Type of Justice
1. Distributive justice: Benefit and burden
should be equally shared.
2. Restorative justice: Apology to show one
is truly sorry.
3. Retributive justice: Punishment is fair
and just.
4. Compensatory justice: Fair compensation
for any injury or loss.
Traditional 5-Qtns Approach (Velasquez)
Whether the decision is:
1. Profitable?
2. Legal?
3. Fair?
4. Right?
5. Going for further sustainability
development?
Ethical Relativism
• There are no absolute truths in ethics.
• What is morally right/wrong varies from
person to person or from society to
society.
Egoism
The doctrine that holds individuals are always
motivated by self-interest.
E.g. It is very difficult to admit our own mistake.
Zieqah Fauzay
:P
 Consequentialism
• An idea that the moral worth of an
action is determined solely by its
contribution to overall utility: that is,
its contribution to happiness or pleasure
as summed among all persons.
• An act is morally right if and only that
act maximizes the net good or
minimizes the net negative impact of
choices where one must be made.
Deontology
• An approach to ethics that focuses on
the rightness or wrongness of actions.
• It is sometimes described as "duty" or
"obligation" based ethics because
deontologists believe that ethical rules
"bind you to your duty".
• It motivates a decision/action rather
than the consequence of the actions.
• Immanuel Kant: Actions which would be
good for the decision maker and all
members of the society.
• Deontology perspective states it is good to
tell the truth as you also do not want
people to lie to you.
• Relate to the GOLDEN RULE
(enlightened self-interest). Be good to
others and others will be good to you.
Utilitarianism
• Can thus be characterized as a
quantitative and reductionist approach
to ethics.
• It can be contrasted with deontological
ethics (which do not regard the
consequences of an act as the sole
determinant of its moral worth) and
virtue ethics (which focuses on
character), as well as with other varieties
of consequentialism.
Altruism
• Holds that individuals have a moral
obligation to help, serve, or benefit
others, if necessary, at the sacrifice of
self-interest.
Egalitarian (Theory of Justice)
• Political doctrine by William K.Frankena
that holds all people should be treated as
equals and have the same political,
economic, social, and civil rights.
• Eg: Everybody deserves a bonus regardless
of performance.
Libertarian (Theory of Justice)
• A term used by a spectrum of political
philosophies which seek to promote
individual liberty and seek to minimize or
even abolish the state.
• Eg: Employees who do not perform should
not get bonus as they do not make the
same contribution.
Virtue ethics
• It is a branch of moral philosophy that
emphasizes character, rather than rules
or consequences, as the key element of
ethical thinking.
• Eg: Patience, helping those who are in
need and respect them is a virtue.
• Different people, cultures and societies
often have vastly different opinions on
what constitutes a virtue.
Rawls Veil of Ignorance
This concept is to encourage individuals to
think impartially and rationally about people so
that they will not be biased in making decision.
The key point is that, in the veil of ignorance,
a person does not know who they are in the
real world.
That is, a person does not know:
1. Their class position or social status.
2. Their natural talents, abilities,
intelligence, or strength.
3. What their plan for a good life is.
Zieqah Fauzay
:P
 Kohlberg-Cognitive Moral Reasoning demands of individual conscience
(Golden rule).

Level 1: Pre-conventional
• Stage 1: Obedience.
• People behave accordingly to socially
acceptable norms because they are told
to do so by parent or teacher.
• This obedience is compelled with threat
or application of punishment.

• Stage 2: Self-interest.
• A view that right behavior means acting
in one’s own best interests.

Level 2: Conventional
• Stage 3: Conformity.
• Characterized by an attitude which
seeks to what will gain the approval of
others.

• Stage 4: Law and Order.

• One oriented to abiding the law and
responding to the obligations of duty.

Level 3: Post-Conventional
• Stage 5: Human Rights.
• Unity of the community of faith, an
understanding of social mutuality and
a genuine interest in the welfare of
others.

• Stage 6: Universal human ethics.

• Respect for universal principle and the
Zieqah Fauzay
:P
 ISLAMIC ETHICS

 Qalb (heart): A man puts his belief in The Concept Of Self or The Essence Of A
his heart, utters it in his words and Man (Al-Ghazzali)
finally manifests it through his
actions.
 Aql (Intellect): A man acquires knowledge
to understand and interact with
surroundings.
 Nafs (desire): A strong feeling, crave
for something.
 Ruh (soul): Yearns to achieve for
perfection.

Six Powers In The Self/Qalb

 Basic powers in a man:
• Appetite or Al-Bahimiyya (beasty)
• Anger or As-Sabiyya (ferocious)
• Intellect or Ar-Rabbaniya (divine)

 Cannot take place unless there is

an activity in the basic powers:
• Impulsive
• Apprehension
• Will (Irada)

Elements in The Nature of Man

 Sage: The aql
 Pig: Ash, shahwa, lust, gluttony
 Dog: Al-ghadab, anger, ferocity
 Devil: Shaytaniyya

How The Forces Work?

 Aql & Shaytaniyya are contra forces.
They function through shahwa &
ghadab for construction &
destruction.
 Destructive: Animal forces are
instigated by shaytaniyya & revolts
against aql. The aql becomes
subservient to the animal forces.
 Constructive: Aql becomes dominant
and being divine nature it able to
fight the animal forces, divert and
control them to the constructive
channels.

Zieqah Fauzay
:P
 Types Of Nafs
1. Nafs al-Mutma’inna: Successful
accomplishment, aql makes the animal
forces submissive, weaken the devil forces
and eventually leads to harmony (the
tranquil soul).
2. Nafs al Ammara: The evil forces
becomes stronger and dominant,
causing the divine elements to be
weakened until it is almost completely
smothered (the instigating soul).
3. Nafs al-Lawwama: Does not achieve
calmness, yet sets itself against the
love of passions and objects to it.
Devine elements fight and struggle
continue. (the admonishing or self-
accusing soul).
Sources Of Islamic Ethics
• The Qur’an: the most significant source
for human being to referred.
• Sunnah of the Prophet Muhammad
(p.b.u.h) – As the role model to be
imitated.
Axioms Of Islamic Ethical Philosophy
 Responsibility (Fardu ain & Kifayah)
 Benevolence (Kindness to others)
 Free will (ability to think and form
judgments)
 Unity (Tauhid, belong to Allah)
 Equilibrium (Justice & equity, zakat)
 Fard
Degrees Of Lawful And Unlawful Behaviour
 Mustahabb
In Islam
 Mubah (Halal)
 Makruh
 Haram (Forbidden)
TOPIC 3: APPROACHES TO ETHICAL
DECISION MAKING
Ethics at Workplace
Why is it Important?
• The ways employees view their own
treatment by the company
determines what the employees think
about their company’s ethics
program.
• If an organization wants employees to
observe a set of corporate ethical values,
the workers must be convinced the
organization really means what it says.
• There must be a level of trust
that permits this belief to
flourish.
Balance of Interest and Trends.
• Expectations for ethical behavior in
workplace have changed. Why? Because
of public sensitivity and stakeholders’
pressure on employers/regulators for a
more responsible corporate behavior.
The balance of consideration has moved from
employer-interest-only model to an employee-
and-employer-interest model.
• Employees
Workplace cannot
Dos and Don’tsbeoffired basedand
Employer on
emotional whim or personal bias.
Employee
• Employees cannot be hired based on
family status, religion, sexual preference,
several other legally protected subjects,
but based on their ability to do jobs.
• Employer should provide a harassment-
free workplace.
• Employers are expected to observe legal
statutes/regulations for employee’s
protection (privacy and civility).
Zieqah Fauzay
:P
 Employees’ Right Fair Treatment
• Employer cannot order his employee to • No discrimination on employees at
pollute, risk their health or safety or workplace.
say nothing when the truth was • Discrimination: Unethical and illegal if
distorted. it involves age, race, sexual preference
• Some of the rights has become (fair treatment for the disabled).
protected by new legislation, common • Equal opportunity for employment,
law, union contract, corporate policies, salaries, promotion, working
practices. hours, benefits equal pay for equal work.
• Privacy and dignity of person,
personal information, and property. Healthy & Safe Workplace
• Fair treatment. • Conducive working environment.
• Healthy and safe work environment. • Smoke-free area.
• Ability to exercise conscience. • Family-friendliness workplace (on-site
• Trust (key to leadership, innovation, daycare for children of employees).
loyalty & performance). • Flexible working hours.
• Friendly facilities.
Privacy & Dignity
• Safe parking area.
• Individual personal rights are more
• Safe office area.
important than those of an employer
• Fitness/recreation center.
unless the employer’s interest is
reasonable, legitimate, and morally
Ability to Exercise One’s Conscience
accepted.
• Conscience: Moral sense of right and
• Eg: It is not acceptable to place a CCTV
wrong.
in a washroom unless there is a threat
• Each employee should be free to give
to life and health and if there is an
opinion/suggestion to improve workplace
informed consent.
condition for the sake of the
stakeholders.
Civil Conduct Uncivil Conduct
• Employees should exercise their right to
Treating others Shouting, profanity,
come forward and speak out their ideas.
with dignity, abusive, aggressive,
• Dare to become a whistle-blower.
respects, politeness, violent language,
considerations. slamming doors.
Trust
Speaking in Throwing objects,
• Is there a sufficient trust for people
appropriate humiliating, degrading,
to share ideas without fear of losing
voice/tones. insulting, etc
jobs or the respect of their coworkers
Being respectful Telling inappropriate
and managers.
of others’ right jokes.
• If employees have sufficient trust, they
to express their
will participate wholeheartedly in
views
restructuring sessions involving
even if you disagree.
Managing conflict Distributing unjustified downsizing (ethical renewal).
in a respectful comments. • They may accept the necessity of
way than a shared work assignments with greater
confrontational understanding (contingent workforce).
way.

Zieqah Fauzay
:P
 Bribery
Fraud and white-collar
crimes encompass a range of deceptive or
unlawful activities often committed by
individuals or organizations in professional or
business settings for financial gain. These can
include various forms of deceit,
misrepresentation, or violations of trust.
Bribery is the act of offering, giving, receiving,
or soliciting something valuable to influence
the actions, decisions, or behaviour of an
individual in a position of trust or power.
While bribery often involves financial
incentives, it's not limited to money
matters.
Types of Bribes:
1. Cash Bribes: Direct payments of money
offered or received to influence decisions
or actions.
2. Kickbacks: Payments made to someone in
return for a favour or as a reward for
arranging a business transaction. For
instance, a vendor might offer a
percentage of a contract's value to an
Employees, suppliers, competitors, customers,
employee who facilitated the deal.
communities, trade unions, etc.
3. Non-Monetary Bribes: These include
gifts, services, vacations, valuable items,
or favours offered to influence someone's
behaviour or decisions.
4. Political Bribes: Attempts to influence
government officials or politicians
through donations, gifts, or promises of
support, aiming to gain preferential
treatment or influence policy decisions.
Reasons for Bribing:
1. Gaining Advantage: Bribes are often
offered to gain a competitive edge, secure
a contract, or receive preferential
treatment.
2. Securing Business Deals: Some use bribes
to secure business deals or expedite
administrative processes.
3. Avoiding Penalties or Consequences:
Bribes might be given to avoid
penalties, evade legal consequences, or
obtain confidential information.
4. Influence and Power: Bribes can be used
to influence individuals in positions of
power or authority for personal or
organizational benefits.
5. Cultural Norms: In some regions or
industries, bribery might be normalized
due to cultural practices or historical
precedents.
Stakeholder Impact Analysis
 When a businessman or professional
accountant faces an ethical problem, the
first resource for guidance should be to
corporate and professional codes of
conduct.
 However, the corporate and
professional codes of conduct often do
not specifically apply to the problem
faced by a professional accountant.
 The decision maker can be guided by
general ethical principles within a
framework to arrive at a defensible
ethical decision.
Who are Stakeholders?
Fundamental Interests of Stakeholders
• Well-offness
• The proposed decision should
result in more benefits than costs.
• Fairness
• The distribution of benefits and
burdens should be fair.
• Right
• The proposed decision should not
offend the rights of the
stakeholders and the decision
maker.
• Virtuosity
• The proposed decision should
demonstrate virtues reasonably
expected.
Zieqah Fauzay
:P
 Measurement Of Quantifiable Impacts Dealing With Uncertain Outcomes
PROFIT: The analysis can be based on the best estimates,
• is a fundamental to the interests of on three possibilities: most optimistic,
the shareholders. pessimistic, and best estimate.
• it is a short-term measure, and that
several important impacts are not Expected Value of an Outcome = Value of the
captured in the determination of profit. Outcome x Probability of that Outcome
occurring
Items Not Included in Profit:
Measurable Directly Not measurable The advantage of this expected value
Directly formulation is that the cost-benefit analysis
When a company Other externalities framework can be modified to include the risk
pollutes, the cost of exist where the cost is associated with outcomes to be included.
cleanup is usually included in the
absorbed by determination of the Risk-adjusted or Expected Value of Net Benefits
individuals, company’s profit, = Expected PV of Future Benefits - Expected PV
companies, or but where the of Future Costs
municipalities. These benefit is enjoyed by
costs are referred to persons outside of  The usefulness
Identifying of a& SIA
Stakeholders depends
Ranking Theiron
as externalities. Their the company. the full Interests
identification of all
impacts can often be Examples: Donation stakeholders and their interest, and
measured directly by and scholarship. The on a full appreciation of the
the costs of cleanup benefit cannot be significance of the impacts on the
incurred by others. measured directly. position of each.
 Sometimes, CBA does not fully reflect the
It is possible to importance of a stakeholder or of the
measure these impact involved.
impacts directly
using surrogates or Assessment Of Non-Quantifiable Impacts
mirror image  Fairness Among Stakeholders.
alternatives. For • A decision will be considered unethical
example, a unless it is seen to be fair to all
scholarship. stakeholders.
• Fairness is evidenced by a relatively
A surrogate for the even distribution of the benefits and
benefit could be the burdens springing from a decision.
increase in earnings • Example: it is possible that a decision to
gained by the increase taxes may weigh more heavily on
recipient. high-income earners but be seen as
relatively fair in terms of their capacity
Bringing The Future to The Present to pay those taxes.
Future values are discounted at an interest
rate that reflects the expected interest rates  Rights Of Stakeholders.
in future years (NPV). • A decision will only be considered
ethical if its impacts do not offend the
NPV = PV of benefits − PV of costs of rights of the stakeholders impacted
proposed action. upon, and the rights of the person
making the decision.

Zieqah Fauzay
:P
 Types of Stakeholder Impact Analysis
 Traditional 5-question approach:
Graham Tucker.
• This approach involves the examination
or challenge of a proposed decision
through the five questions.
• Is the decision:
i. Profitable?
ii. Legal?
iii. Fair?
iv. Right?
v. Going to further sustainable
development?

 Traditional Pastin’s approach.

• Key aspect:
i. Ground rule ethics (To
illuminate an
organization’s and/or an
individual’s rules and
values).
ii. End-point ethics (To
determine the greatest net
good for all concerned).
iii. Rule ethics (To determine
what boundaries a person
or organization should
take into account
according to ethical
principles).
iv. Social contract ethics (To
determine how to move the
boundaries to remove
concerns or conflicts).

 Traditional moral standards approach:

Valesquez
• This approach offers a framework that
is more suited to the consideration of
decisions which have significant impacts
outside the corporation.
• Moral standard:
i. Utilitarian: Maximize the
net benefit to
society.
ii. Individual rights: Respect and
protect.
iii. Justice: Fair distribution of
benefits and burdens.

Zieqah Fauzay
:P