ACGD213

ETHICS AND CORPORATE GOVERNANCE

TOPIC 1:
INTRODUCTION TO ETHICS

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COURSE OUTCOME
At the end of this course, students should be able to:
 
CO1: Discuss concepts, theories and philosophy of ethics

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ETHIC
Ethics is a set of moral principles that distinguish what is
right and wrong.

Concerned with the morality & fairness of our decision &

consequences.

Governing the members of profession, business and

society.

Business ethics is a form of professional ethics that

examines ethical principles and moral or ethical problems
which arise in a business environment.

Example of ethic in work OR life?

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MORALITY

Yardsticks / standard of ethics

(morality is not the whole ethics)

To determine whether a
The study of ethics is involved
person has been ethical, his
with investigating and
moral beliefs and moral
knowing if the outcome of an
standards have to be
action has been morally
examined by moral
right.
reasoning.

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Moral Reasoning
 Moral reasoning (moral development) is a process of
determining whether an action is right or wrong in a given
situation.
 Moral reasoning involves the application of reasoning and
logical thinking to arrive at moral judgement.
 The criteria of ethical reasoning include:
a. logic;
b. accuracy; and
c. consistency.
ETHICAL VS MORAL
DECISION?
 But ethical decisions should recognise the context within which
they are set. That is, they must recognise that duties can be ranked
in a hierarchy (for example, to stop at an accident to render
assistance trumps the promise of meeting for coffee); in a similar
way, consequences can be ranked too.

 In moral decisions, in which the importance of others and their

actual situation in the world, is recognised, community decisions
are based on dialogue between all those on whom the decision
impacts. That dialogue should aim to be inclusive, non-coercive, self-
reflective, and seek consensus among real people, rather than seek
an elusive absolute moral truth.

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Moral and Legal Standards
The words ‘ethics’ and ‘moral’ are often used
interchangeably

Morals are the customs established by a group of

individuals, whereas ethics defines the character of an
individual

Legal standards may be clear because they are supported

by rules, regulations, laws, acts, instructions, and others
Comparison between Moral
and Legal Standards
MORAL THEORIES

Utilitarian
Theory

Right & Moral Theory

Duties Theories of
Justice

The Ethics
of Care

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1. Utilitarian Theory

Based on the view that any action/policy should evaluated on the

basis of benefits & costs it will impose on the society.

The moral worth of actions or practices is determined solely by

their consequences/outcome of choosing one action/policy over
other actions/policies.

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. Theory of Right & Duties

Based on Interest theory. Having a right to something means that

it is in your interest, or is to your benefit, and someone else has a
duty to provide it.

A right is an expectation about something you deserve or a way to

act that is justified through a legal or moral foundation.

Duties are a direct result of the acceptance of rights. Each person

has a duty to uphold or respect another person’s rights, just as he
has the duty to uphold your rights.

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Types of Rights
TYPES OF
RIGHTS

Legal & moral Specific & Negative &

right General rights positive rights

Legal right Moral right Specific rights Negative rights

Natural or
General rights Positive rights
human right

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Theory of Right

Strengths

• It defines and confirms that all humans have right by virtue

being an individual being.

Weaknesses

• This theory can be confusing to the mind if everyone

claims for individual right.

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3. Theory of Justice
Justice is fairness. It refers to the quality of being morally just or
demonstration of righteousness, fairness and equity in conduct.

Concept of justice is relevant primarily in the distribution of benefits and

burden (cost) when we correlate the concept of justice and rights.

For example : Justice in economic system.

- Annual Budget & Malaysian Plan that consider the interest of all parties.
- PEMERKASA + BUDGET

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3. Aristotle Theory of Justice

Aristotle divided justice into two forms:

 Universal/procedural – universal application of moral
concept
Particular – for specific situation
o corrective/compensatory – compensating persons for
wrongdoings
oRetributive – the extent of punishment should fit the
offence
oDistributive – deal with distribution of burden and cost

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3. Rawl Theory of Justice
This theory recognize that conflicts and inequality in distribution of wealth,
power and income no doubt exist in such an environment.
It assume that conflicts may be settled by devising a fair method of choosing
the principles to resolve the conflicts.

Theory of justice revolves around the adaptation of two

fundamental principles of justice which would , in turn, guarantee a
just and morally acceptable society.

The first principle guarantees the right of each person to have the
most extensive basic liberty compatible with the liberty of others.
The second principle states that social and economic positions are
to be everyone’s advantage and open to all.

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4. The Ethics of Care
Ethics of care is sometimes called "ethics of love" or "relational
ethics,“. It implies that there is moral significance in the
fundamental elements of relationships and dependencies in
human life.

Normatively, care ethics seeks to maintain relationships by

contextualizing and promoting the well-being of care-givers and
care-receivers in a network of social relations

Widely applied to a number of moral issues and ethical fields,

including caring for animals and the environment, bioethics, and
more recently public policy.

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SUMMARY MORAL & ETHIC

Ethic

Morality

Moral Moral
beliefs standards

have to be examined by moral reasoning.

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BUSINESS ETHIC
• Promote, develop & cultivate an ethical system of doing business
Purpose • 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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 Islamic/religious
Kantian theory
perspective

Utilitarian Sustainability
theory development
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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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
• Did not 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
Avoid making
of ‘haram’
too many
items are
oaths
forbidden

Dr Muzammil
Siddiqi
(president of the
Hoarding Fiqh Council of
merchandise North America) Mutual
to increase the consent is
prices is necessary
forbidden

Be strict in
Monopolies regards to
are forbidden 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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 Social sustainability

• the community provides equitable opportunities and

outcomes for all its members, particularly the
Equity
poorest & most vulnerable members of the
community

Diversity • the community promotes & encourages diversity

• the community provides processes, systems &

Interconnected/Social structures that promote connectedness within &
cohesions outside the community at the formal, informal &
institutional level
• the community ensures that basic needs are met &
fosters a good quality of life for all members at the
Quality of life
individual, group & community level (eg. health,
housing, education, employment, safety)

• the community provides democratic processes and

Democracy & governance
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/32
 Ethical framework
for business
environment

Stakeholder Impact Ferrell Fraedrich

Analysis Ethical Framework

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Stakeholder Impact Analysis

Suppliers
Custome Government
r

Employee Creditor

Stockholder STAKEHOLDER
/ IMPACT Community
shareholder ANALYSIS

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SUMMARY OF TOPIC 1
Ethic
Definition
Morality

Utilitarian
theory

Theory of
right and
Moral duties
TOPIC 1 theories
Theory of
justice
Business The ethics of
ethics care Utilitarian
theory
Kantian
Ethical Islamic
framework Stakeholder perspective
for business Impact Sustainable
environment Analysis development

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