BUSINESS ETHICS AND CORPORATE GOVERNANCE (CRG520)

CHAPTER 2 : MORAL REASONING IN BUSINESS (THE CONVENTIONAL PERSPECTIVE)

NUR SYAFIQAH BINTI MUSTAFFA NABILAH SYAHIRAH BINTI ZULKANAIN SHAHIDA AZLIN BINTI SHAMSUDIN 2011271164 2011285168 2011210948

MORAL REASONING
A thinking process with the objective of determining whether an idea is right or wrong. It also refers to the reasoning process by which human behaviors, institutions or policies are judged to be in accordance with or in violation of moral standards. Moral standards are standards on which the judgement of morally right or wrong, or morally good or bad is made.

MORAL REASONING (contd)

Moral standards include both specific moral norms and more general moral principles. Moral norms are standards of behavior that require, prohibit or allow certain specific kinds of behavior. Moral norms are standards of conduct that should or must be followed. Prohibitions against lying, stealing, injuring etc. are all moral norms.

MORAL REASONING (contd)

Moral principles are much more general standards that are used to evaluate the adequacy of social policies and institutions as well as of individual behavior.
Legal standards are standards on which judgment of legally right or wrong is made in accordance with law.

MORAL & LEGAL STANDARD

Moral Standard
One should not unnecessarily restrict the freedom of another

Legal Standard
One must not act in a way that deprives others of their civil rights.

Cognitive Moral Development By Kohlberg

Kohlberg Moral Development

Lawrence Kohlbergs stages of moral development is actually an adaptation of a psychological theory constituted by a Swiss Psychologist, Jean Piaget.
Lawrence Kohlberg has come out with SIX (6) stages in the development of a persons ability to reason about moral matters. The stages are divided into three levels, each containing two stages.

Kohlberg Moral Development

LEVEL ONE : PRE-CONVENTIONAL STAGES Stage One : Punishment and obedience orientation Individuals focus on the direct consequences of their actions on themselves. An action is assumed as morally wrong because the doer is punished.

Stage Two : Self-interest driven

WII.fm
Whats In It For Me?

Shows a limited interest in the needs of others, but only to a point where it might further the individual's own interests.
As a result, concern for others is not based on loyalty or mutual respect, but rather a "you scratch my back, and I'll scratch yours" mentality.

LEVEL TWO : CONVENTIONAL STAGES Stage Three : Good interpersonal relationship Living up to what is expected of people and seeking approval from others by pleasing or helping others by trying to be a "good boy" or "good girl" to live up to these expectations. It judges the morality of an action by evaluating its consequences in terms of a person's relationship, which now begin to include things like respect, gratitude

Stage Four : Maintaining the social order Fulfilling agreed-to duties and obligations, by displaying obedience toward authority, fixed rules, laws and maintenance of social order. An act is therefore wrong, regardless of motives or circumstances if it violates a rule.

LEVEL THREE : POST-CONVENTIONAL STAGES

Stage Five : Social contract driven

The world is viewed as holding different opinions, rights and values. Such perspectives should be mutually respected as unique to each person or community. Laws are regarded as social contracts rather than rigid edicts. Democratic government is ostensibly based on stage five reasoning.

Stage Six : Universal ethical principle driven

Laws are valid only insofar as they are grounded in justice, and a commitment to justice is carried with an obligation to disobey unjust (unfair) laws.
In this way action is never a means but always an end in itself; the individual acts because it is right, and not because it is instrumental, expected, legal, or previously agreed upon.

Teleology / Consequentialism / Utilitariasm

Ethical Theories
Justice and Fairness Deontology

Teleology Theory
Teleology is derived from the Greek word telos, which means ends, consequences and results. Teleological theories study ethical behaviour in terms of the results or consequences of ethical decisions. It focuses on the impact of decision-making. It evaluates decisions as good or bad, acceptable or unacceptable, in terms of the consequences of the decision.

Teleology Theory (contd)

Example :
Investors judge an investment as good or bad, worthwhile or not, based on its expected return. If the actual return is below the investors expectation, then it is deemed to be a bad investment decision. If the return is greater than expected, it is considered a good or worthwhile investment decision.

Teleology Theory (contd)

Ethical decisions are right or wrong as they lead to either positive or negative results. Ethically good decision result in positive outcomes, whereas ethically bad decision lead to either less positive outcomes or negative consequences. Non-ethical comparative value of the consequence : positive non-ethical results (happiness, enjoyment) vs. negative non-ethical results (unhappiness, misery)

Teleology Theory (contd)

Consequentialism (utilitarianism) defines good and evil in terms of the non-ethical consequences of pleasure and pain. The ethically correct action is the one that will produce the greatest amount of pleasure or the least amount of pain.
Pleasure and pain have both quantitative and qualitative aspects.

Consequentialism (contd)

Weaknesses in Consequentialism
No common unit of measurement for happiness, nor is one persons happiness the equivalent of another persons happiness. The distribution and intensity of happiness. Example : Giving RM100 each to two persons vs. Giving RM100 to 100 persons.

Deontological Ethics
Deontology evaluates the ethicality of behavior on the motivation of the decision-maker. An action can be ethically correct even if it does not produce a net balance of good over evil for the decision maker or for society as a whole. It says in this situation I should do such and such.

Deontology (contd) Weakness in deontology

No clear guidelines for deciding what is right and wrong when two or moral laws conflict and only one can be followed.

Justice and Fairness

1. Distributive justice 2. Compensatory justice 3. Retributive justice

Distributive justice
Distributive justice concerns with a fair distribution of societys benefits and burdens. Three main criteria for determining the just distribution : Need (taxation systems) Arithmetic equality (distribution of cake: the person who cuts the cake get the last piece) Merit (if one person contributes more to a project then that person should receive a greater proportion of the benefits from the project)

Compensatory justice
Compensatory justice concerns with finding a just way of compensating people for what they lost when they were wronged by others.

Example : Personal liability for automobile accidents; if someone damages your car through no fault of your own, that person has the duty to pay for restoration of the wholeness of the car.

Retributive justice
Retributive justice has to do with just imposition of punishment and penalties upon those who do wrong.
The wrongdoer needs to be punished, especially if the wrong was done intentionally, so that justice is served, wrongdoers behavior is changed.

Theories of Justice
1. Egalitarian 2. Libertarian

Egalitarian
All human beings are equal in some fundamental respects.
Each person has an equal claim to societys goods and services. Equal proportion differences. regardless of individual

Libertarian
People are free to choose the kind of contribution they want to make to the economic system. Human are free to act according to their own purposes.

People do not reserve equal economic returns since they do not all make the same contribution.
Reward compensated with effort.

John Rawlss Veil of Ignorance

Rawls recognizes that persons act on self-interest. Rawls thinks that a person can be rational about his self- interest. This means that:
A person has a plan to get what they want out of life A person knows what they need to make their plan work A person mostly stick to their plan throughout their lives, even if they never completely successful.

John Rawlss Veil of Ignorance

Rawls figures that they would simply design a society which would help them with their own personal plan. According to Rawls, this would not result in a just and fair society. To overcome this problem, Rawls has invented the veil of ignorance, which applies to persons with selfinterest while they are supposed to be figuring out the best social contract.

John Rawlss Veil of Ignorance

Veil of ignorance prevents people from exercising principles of justice that are biased toward their own combinations of talents and characteristics. No one knows his place in society, status, intelligence, strength etc. Thus no one is advantaged or disadvantaged in the choice of principles. Parties are forced to be fair and impartial; show no favoritism toward any special group.

Virtue Ethics
Virtue ethics focuses on the moral character of the decision maker rather than the consequences of the action (consequentialism) of the decision maker (deontology). It recognizes that there are personalities. many aspects to our

Each of us has a variety of character traits that are developed as we mature emotionally and ethically. Virtues are those character traits that dispose a person to act ethically and thereby make that person a morally good human being.

Virtue Ethics (contd)

By focusing on the whole person, who has a unique combination of virtues, this theory avoids false contradictions. Virtue ethics denies false assumptions such as; it is either business or ethics = you can either do good or be profitable. For example, executives have two characters, the first character represents personal values, and the other represents corporate values.

Golden Rule DO UNTO OTHERS AS YOU WOULD HAVE THEM DO UNTO YOU = DONT DO TO OTHERS WHAT YOU DONT WANT OTHERS DO TO YOU

Important Terms
Ethical relativism : the theory holds that morality is relative to the norms of one's culture. That is, whether the action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another. For the relativist, there are no universal moral standards that is, standards that can be universally applied to all people at all times.

Important Terms
Ethical egoism : an action is morally right if the consequences of that action are more favorable than unfavorable only to the agent performing the actions.
Ethical altruism : an action is morally right if the consequences of that action are more favorable than unfavorable to everyone except the agent.

THE END