ACGB 213
CORPORATE GOVERNANCE AND BUSINESS ETHICS
SPECIAL SEMESTER 2018/2019
LECTURE 1:
INTRODUCTION TO
BUSINESS ETHICS
Main reference:
http://www.referenceforbusiness.com/management/Em-Exp/Ethics.html
Youtube:
Kantianism vs utilitarianism: https://www.youtube.com/watch?v=HQtTVnbhxmk
Utilitarianism: https://www.khanacademy.org/partner-content/wi-phi/wiphi-value-theory/wiphi-ethics/v/utilitarianism-part-1
Sustainability : https://www.youtube.com/watch?v=B5NiTN0chj0
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COURSE OUTCOME
To demonstrate the comprehension of theories, concepts and philosophy
ethics and corporate governance as well as ethics for professional
accountants.
Group
presentation
(1%)
Quiz 1
(5%)
Assessment
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ETHIC
A system of moral principles & attitude that guides our
actions to be morally correct & just.
Concerned with the morality & fairness of our decision &
consequences.
Governing the members of profession, business and
society.
Example of ethic in work?
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MORALITY
Yardsticks/standard of ethics
(morality is not the whole ethics)
The study of ethics is involved with
investigating and knowing if the
outcome of an action has been
morally right.
To determine whether a person has
been ethical, his moral beliefs and
moral standards have to be examined
by moral reasoning.
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SUMMARY MORAL & ETHIC
Ethic
Morality
Moral
beliefs
Moral
standards
have to be examined by moral reasoning.
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BUSINESS ETHIC
Purpose
• Promote, develop & cultivate an ethical system of doing business
• Encourage company to has high moral & ethical standing among all
levels of the organisational structure
Elements in business ethics: TNB Case
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Kantian theory
Islamic/religious
perspective
Sustainability
development
Utilitarian theory
ETHICAL
REASONING
IN BUSINESS
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1. Utilitarian Theory
The moral worth of actions or practices is determined solely by
their consequences/outcome of choosing one action/policy over
other actions/policies.
Based on the view that any action/policy should evaluated on the
basis of benefits & costs it will impose on the society.
The function of morality is to promote human welfare by
minimizing harms & maximizing benefits
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Utilitarian principles
The most utility for all persons concerned including those who are
affected by it & the performer of that action.
• The state, people of the state, locality, society or others.
An action is right as long as its benefits outweigh cost.
• Theory of the good is to maximize satisfaction
• Produce the greatest net benefits for the largest no of people.
Example: Pollution
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Criticism of utilitarian
Difficult to apply
• when dealing with values that are difficult to measure in order to determine the
maximum benefits to all affected persons.
• Example: health hazards, moral hazards, emotional disturbance, sentimental
upset.
Difficult to compare
• Difficulty of attaining a full knowledge and certainly of the consequences of our
actions.
• Example: Who will be affected by decision/action?
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2. Kantian Theory
Immanuel Kant (1724-1804)
• Human should be treated as ends & not as a
means
• The right decisions for the right reasons
• Goodness depends on rightness
• It was not the consequences of actions that make
them right or wrong but the motives of the person
who carries out the action
• The consequences of an act of willing cannot be
used to determine that the person has a good will
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Criticism of Kantian Theory
Narrow and inadequate
• didn't clearly explain concepts in general: Concept of
reason.
Ignore emotion
• The Kantian idea that an agent could go through life
‘doing the right thing’ even ‘while her emotions are
way out of line.
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3. Islamic /Religious Perspective
Honesty &
kind dealings
Transactions
of ‘haram’
items are
forbidden
Avoid making
too many
oaths
Dr Muzammil
Siddiqi
(president of the
Fiqh Council of
North America)
Hoarding
merchandise
to increase the
prices is
forbidden
Monopolies
are forbidden
Mutual
consent is
necessary
Be strict in
regards to
weight &
measures
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4. Sustainability Development (SD)
development that meets the needs of the present without
compromising the ability of future generations to meet their own
needs.
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Economy sustainability
identify various strategies that make it
possible to utilize available resources to best
advantage.
promote usage of those resources that is
both efficient &responsible, and likely to
provide long-tem benefits.
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Environmental sustainability
This means that the source & sink functions of the
environment should not be degraded.
Environmental sustainability programs include
• actions to reduce the use of physical resources,
• the adoption of a ‘recycle everything/buy recycled’ approach.
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Social sustainability
Is the idea that future generations
should have the same or greater
access to social resources.
To provide a good quality of life
need
to
apply
social
sustainability dimension.
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Equity
Diversity
• the community provides equitable opportunities and outcomes for all
its members, particularly the poorest & most vulnerable members of
the community
• the community promotes & encourages diversity
Interconnected/Social
cohesions
• the community provides processes, systems & structures that
promote connectedness within & outside the community at the
formal, informal & institutional level
Quality of life
• the community ensures that basic needs are met & fosters a good
quality of life for all members at the individual, group & community
level (eg. health, housing, education, employment, safety)
Democracy &
governance
• the community provides democratic processes and open &
accountable governance structures.
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United Nation proposed to use this sustainable development goals globally.
Source: https://www.un.org/sustainabledevelopment/blog/2015/12/sustainable-development-goals-kick-off-with-start-of-new-year/
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Ethical framework
for business
environment
Stakeholder Impact
Analysis
Ferrell Fraedrich
Ethical Framework
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Stakeholder Impact Analysis
Suppliers
Customer
Government
Employee
Stockholder/
shareholder
Creditor
STAKEHOLDER
IMPACT ANALYSIS
Community
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Ferrell Fraedrich Ethical Framework
Teleological
• Actions are judged as ethical or unethical based on their results.
Egoism
• Actions are judged as ethical or unethical based on the consequences to one's
self.
• Actions that maximize self-interest are preferred.
Utilitarianism
• Actions are judged as ethical or unethical based on the consequences to others.
Actions that maximize the "good" (create the greatest good for the greatest
number) are preferred.
Deontological
@Kantian
• Actions are judged as ethical or unethical based on the inherent rights of
individual and the intentions of the actor.
• It is the action itself that must be judged and not its consequences.
Justice
• Actions are judged as ethical or unethical based on the fairness shown to those
affected.
Relativism
• Actions are judged as ethical or unethical based on subjective factors that may
vary from individual to individual, group to group, and culture to culture.
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True story that related a lot with
business ethics:
Deepwater Horizon (2016)
A dramatization of the disaster in April
2010, when the offshore drilling rig
called the Deepwater Horizon exploded,
resulting in the worst oil spill in
American history.
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SUMMARY OF TOPIC 1
Ethic
Definition
Morality
Utilitarian theory
Kantian theory
TOPIC 1
Ethical Reasoning In
Business
Islamic/religious
perspective
Sustainability
development
Stakeholder Impact
Analysis
Ethical framework for
business environment
Ferrell Fraedrich
Ethical Framework
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