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0 Ethics and Its Conceptualization in Life

1. Define and differentiate between ethics and morality.

Ethics can defined as a set of ‘principles that contains behavioural codes to determine
what is right or wrong’. Moreover, ethics outlines the moral duty and obligations that
any human being should practise. It derived from the Greek word, ethos, which means
character, spirit and attitudes of a group of people or culture’.
Morality refers to norms, values and beliefs embedded in social processes, which
define right and wrong for an individual or a community.
Differentiation of ethics and morality
Ethics in contrast is the study of moral standards whose explicit purpose is to
determine, as far as possible, whether a given moral standard or judgement based on
that standard is more or less correct.

2. Describe how ethics is developed in an individual.

Religious Beliefs
Virtually all the world's religions teach an essentially similar code of ethics that
emphasizes honesty, respect for others and their rights, and selflessness. Therefore, in
both business and personal situations, a highly religious person is likely to act in ways
that most of us will regard as highly ethical.
Ethical Philosophers
In sharp contrast to these ethics of casual social consensus, the philosophers who have
developed systems of ethics—such people as Plato, Aristotle, Kant, Bentham, and
more recent ethical thinkers throughout the world—have developed basic principles
from which they have derived systems of ethics.
Childhood Upbringing
Each person learns ethics from his or her parents—what they teach in words and
perhaps more importantly through their actions. These teachings shape our most
fundamental attitudes about what is "right" and what is "wrong."
2.0 Internalizing Ethics in the Conduct of Business

1.Recognize the theoretical models of Kohlberg and Trevino underpinning moral

development and ethical reasoning.

Theoretical model of Kohlberg

Lawrence Kohlberg expanded on the earlier work of cognitive theorist Jean Piaget to
explain the moral development of children, which he believed follows a series of
stages. Kohlberg defined three levels of moral development: preconventional,
conventional, and postconventional. Each level has two distinct stages. During the
preconventional level, a child’s sense of morality is externally controlled. Children
accept and believe the rules of authority figures, such as parents and teachers, and
they judge an action based on its consequences. During the conventional level, an
individual’s sense of morality is tied to personal and societal relationships. Children
continue to accept the rules of authority figures, but this is now because they believe
that this is necessary to ensure positive relationships and societal order. During the
postconventional level, a person’s sense of morality is defined in terms
of more abstract principles and values. People now believe that some laws are unjust
and should be changed or eliminated.

Theoretical model of Trevino

The cognitive theory utilized by Trevino is Lawrence Kohlberg’s (1969) model of
cognitive moral development. Trevino asserts Kohlberg’s theory, originally based on
studies of children, is applicable to understanding adult decision making in ethical
dilemmas because the theory is based on moral beliefs, not the product of maturation.
Kohlberg’s model of cognitive moral development classified the reasoning for a
decision into six stages and three levels of increasing moral complexity that emerge
from individual moral beliefs. Individuals are described by the stage they occupy, the
stage they are leaving and the stage they are moving to. As a result of the hierarchical
nature of the stages, lower moral stages are subsumed as the individual progresses in
development. Trevino posits that by itself, cognitive moral development of an
individual is not sufficient to explainethical decision making behavior and therefore
includes situational and individual moderators to explain behavior in the context of
the situation. The situational moderators account for the influences environment and
culture play in the individual decision making process. Furthermore, Trevino’s model
accounts for the influence situational moderators have on the cognitive moral
development of the individual through a feedback loop to the individual’s cognitions.
The individual moderators account for the internal influences and processes affecting
the individual’s decision making process.

2.Identify and discuss the common ethical challenges faced by business people.

Personal traits
Individuals showing this trait are careful, reflective, and reliable, which means that
they tend to be responsible organizational citizens. Research shows that
conscientiousness is indeed positively associated with higher levels of moral
reasoning, leading people high in this trait to display less antisocial, unethical, and
even criminal behavior.
Conflict of Interest
Self-dealing. For example, you work for government and use your official position to
secure a contract for a private consulting company you own. Another instance is using
your government position to get a summer job for your daughter.Accepting
benefits. Bribery is one example; substantial [non token] gifts are another. For
example, you are the purchasing agent for your department and you accept a case of
liquor from a major supplier.
Responsibility to stakeholders
Identification of potential stakeholders is essential for ethical behavior. Failure to
identify stakeholders has led many to make unethical decisions without realizing they
had a moral dilemma in the first place. For years companies adhered to the purpose of
making profit, legally.
Level of Openness
Open communication is an important element of successful personal relationships,
and workplace relationships are no different. Satisfied employees comfortably voice
concerns and ask questions, and they know where to find the answers. In difficult
economic times, openness is crucial in building an atmosphere of trust between
employers and employees.
Character of Organizations
Organizational leaders in particular must be completely aware of the consequences of
certain decisions and organizational trajectories, and ensure alignment with societal
interests. There are many examples of ethical mistakes in which organizational
decision makers pursued interests that benefited them at the cost of society. The 2008
economic collapse saw a great deal of poor decision-making on behalf of the banks.

3. Differentiate between ethical management and management of ethics.

Ethical management relates to the undertaking of management functions in an
ethical manner by doing the right thing for individual success and organizational
effectiveness where as management of ethics involve managers applying internal
policies, rules and regulations as well as stipulated government laws to manage
ethical issues.

3.0 Ethical theories and principles

1.Explain the fundamentals of moral philosophy.
Ethics is divided into two branches which is meta-ethics and normative ethics.
Meta-ethics is the study of where ethical concepts came from and what they mean. It
has two main forms. First, moral relativism considers what is right or wrong is not
absolute. It is relative and variable depending on the person, circumstances and social
situation. Second, moral objectivism considers certain acts as objectively right or
wrong, independent of human opinion.

Normative ethics is ‘a set of principles that guide or regulate human conduct’.It

provides general guidelines for deciding what is morally right or wrong.

Two types of ethical theories:

Teleological theories: The rightness of actions is determined solely by the amount of
good consequences they produce. These theories are also referred to as consequential
theories.
Deontological theories: also referred to as non-consequential theories. It denies that
consequences are relevant to determining what we ought to do.
2. Explain influential ethical theories and/or principles applied in today’s global era.

Theory of Rights
To have rights is to be entitled to act on our own or to be treated by others in certain
ways without asking permission of anyone. Rights play an important role in business
ethics, as well as in all moral issues. Employers, employees, consumers, general
public, humans, non-humans each have rights.

Theory of Justice
Justice as a social process refers to the quality of being morally just and/or
demonstration of righteousness, fairness and equity in just conduct when dealing with
others. Justice and business ethics are linked relevantly in the distribution of benefits
and burdens (costs) when we correlate the concepts of justice and rights. It is a moral
right to treat all individuals as free and equal persons out of an act of justice. Justice is
an important concept in evaluating social organization. We can also ask about the
justice of the economic system in which business activity takes place.

Gilligan’s Ethics of Care Theory

This theory is seen as a feminist theory in the West; a new approach to moral
development. However, this is not the case in eastern dimensions, where caring is
viewed as a value in a society that promotes collectivism rather than individualism. It
propagates a person to be partial to make ethical decisions. It emphasizes caring for
the concrete well-being of those near to us. It emphasizes preserving and nurturing
valuable relationships on individual as well as collective dimensions.

Aristotle’s Virtue Ethics Theory

Aristotle defines a virtuous person as someone who has taken control of his life,
cultivated his natural dispositions into moral virtues, and has always throughout his
lifetime found happiness in his actions based on these developed virtues. The virtues
include honesty, self-control, courage, justice, respect, prudence and shame of
failures.
Kant’s Ethics of Duty Theory
The theory is a deontological theory which insists that moral action requires
conformity to moral principles. ‘An action is morally right if and only if the actor is
motivated by good will.’

4.0 Ethical leadership and corporate culture

1. Explain the concept of role in ethics.

A role is a structured set of relationships with accompanying rights and obligations
that are sometimes added to those of ordinary morality over and above those of
everyday life. Moreover, roles are created in order to serve society better as a whole
since everyone is contributing or taking some responsibility to accomplish something
for the well-being of the society. Thus, roles are directly related to social
responsibility. Business people have a role to play for a nation’s economic growth,
prosperity and well-being.

2. Discuss the roles of managers as economic actors, company leaders and

community leaders.

Economic Actors
They must make sound economic decisions, ensuring profitability for the company’s
growth.
Company Leaders
They must manage assets prudently, fulfil the needs of stakeholders and balance any
conflicting interests, being trustees.
Community Leaders
As community leaders, they must exercise powers given upon them that demonstrate
their corporate leadership or citizenship.

3. Define ethical leadership.

According to Brown et al. (2005), ethical leadership defined as the ability or power to
instil ethically acceptable behaviour through personal actions and motivate followers
to emulate such behaviour through two-way communication, reinforcement and
ethical decision-making.
4. Explain the traits of an ethical leader.
Traits are stable personal characteristics of any individual; an individual acts in a
similar fashion at different times and situations and others describe the individual to
those attributes. Examples:
Loyalty
They avoid self interest deals, serve the interests of stakeholders,make objective
decisions and protect proprietary information.
Fairness
They make fair decisions and treat others in a fair and respectable manner.
Respect
They give consideration to the feelings,wishes and right of others.
Integrity
They act with honour and their decisions will always coincide with the ethical vision
and standards of the firm.
Honesty
They are truthful and forthright with their decisions.

5.0 Corporate Governance

1. Explain the meaning of corporate governance.

The official definition of corporate governance in Malaysia as adopted by the
Malaysian Code on Corporate Governance (2000) is the process and structure used to
direct and manage the business and affairs of the company towards enhancing
business prosperity and corporate accountability with the ultimate objective of
realising long-term stakeholder value, while taking into account the interests of other
stakeholders. The role of corporate governance is to oversee the management that
manages the business on a daily basis.

2. Explain how separation of ownership and control in public corporations could

lead to corporate governance problems.
The officers and directors who run the day-to-day affairs of a corporation and make
most of its policy decisions are not necessarily shareholders. This can become a
problem in large, publicly traded corporations. If no shareholder holds a controlling
interest in the corporation, and most shareholders vote by proxy, the corporation's
assets are controlled by the board of directors and the officers. The separation of
ownership and management can lead to a conflict of interest between
management's duty to maximize shareholder value and its interest in
maximizing its own income. A CEO, for example, might be paid a large bonus even
as the corporation approaches bankruptcy. One of the potential problems of using this
method is that it complicates making decisions and forces them to take longer
than they should. For example, if the shareholders are not happy with the board of
directors, they can elect new board members. However, it takes time to distribute
information to all of the shareholders and then have a vote for the board members. By
comparison, other business entities can make decisions much more
quickly.Separating the ownership and control of the company can be beneficial
in cases, but it can also lead to a disconnect between the two parties. The investors
in the company may not understand what really goes on within the company.
Alternately, the employees of the company may not understand exactly what the
investors are thinking on important matters. This can lead to communication problems
and assumptions.

3. Elaborate on the concept “conflict of interest” in the context of shareholder-

professional manager relationships.
Shareholders are the owners in public corporations, but they do not directly control
all the decisions in their company. They have limited power over how the public
corporation is managed. The board of directors, usually consisting of a small number
of people, hire professional corporate managers to manage and make decisions on
daily operations of the corporation. This is known as the top management team, led by
a chief executive officer (CEO). The board of directors focuses on charting the
strategic direction and making strategic decisions.The board of directors and
corporate managers have the tendency to pursue self-interests first, often making
decisions that do not serve the interest of the shareholders. This situation is known
as conflict of interest. Corporate governance in public-listed companies aims to align
the interests of the professional managers with those of the shareholders.
6.0 Corporate Social Responsibility

1. Define stakeholders.
A stakeholder refers to a specific person or groups of people, who have an interest or
a claim in a firm and can affect and be affected by the firm’s decisions and actions.
Evan and Freeman (1993), Crane and Matten (2016) defined stakeholders as an
individual or a group which either is harmed by, or benefits from, the corporation; or
whose rights can be violated, or have to be respected, by the corporation.” The
management of the firm ought to determine how the interests of such groups can be
incorporated or represented in their decisions and actions.

2. Explain a form’s primary and secondary stakeholders.

Primary Stakeholders
Primary stakeholders are the most influential, so firms have to treat them well. If any
primary stakeholder group (e.g. customers/suppliers) becomes dissatisfied and
withdraws their participation, the firm will be seriously damaged or unable to
continue as a going concern.
Primary Stakeholders and their stakes
Shareholders- Profits and return on investment
Employees-Safe and healthy working conditions and fair wages
Customers-High quality at a fair price
Suppliers- Consistent market and prompt payments
Local communities- Investment in the local communities

Secondary Stakeholders
Secondary stakeholders may not be as influential as the primary stakeholders, but they
can negatively affect the reputation of the firms.
Secondary Stakeholders and their stakes
Government-Source of revenue via business taxation,ensures compliance with
the laws and regulations.
Media-Source of business news;influences public opinion
Trade bodies-Adherence to trade regulations
Competition-Fair competition
3. Describe the different forms of Stakeholder Theory.
Normative perspective
The core of the Stakeholder Theory (Donaldson and Peterson, 1995). Attempts to
explain the motivation for a firm to take into consideration its stakeholders’ views in
decision-making. This perspective is based on Kant’s Ethics of Duty theory, where
firms have civil duties that are important to increase or maintain the net good in
society. Stakeholders should be treated based on some underlying moral or
philosophical principles.
Descriptive perspective
Attempts to describe and explain the behaviour of firms and their managers in dealing
with various stakeholders. Firms are likely to consider some group of stakeholders as
more important than others because of their ability to influence the needs of the firms
at any organizational life cycle stage. In short, the strategy that firms adopt in their
relationship with stakeholders depends on the relative importance of a particular
stakeholder group in relation to other stakeholders.
Instrumental perspective
This perspective asserts that a firm must manage its stakeholder relations will in order
to make profits. Corporate managers have to balance and meet the needs of various
stakeholders.This perspective argues that there is a justification for treating
stakeholders well as it is necessary to achieve economic goals.