Ethic Theories

8/9/2019 Ethic Theories

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Business ethics and its

importance Business ethics is the aspect of corporate governance

- has to do with the moral values of managersencouraging them to be transparent in businessdealing.

Good business ethics is the backbone of every forwardthinking business. It helps to understand the reason,its implications and how to address the situation.

Business malpractices have the potential to inictenormous harm on individuals, communities andenvironment.


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The demands being placed on business to be

ethical by its various stakeholders becoming morecomple. Business ethics provides the means toappreciate and understand these challenges moreclearly, in order that !rms can meet these ethicalepectations more e"ectively.

#elp to improve ethical decision making with theappropriate knowledge and tools to allows themanagers to correctly identify, diagnose, analyse

and provide solutions to the ethical problems anddilemmas they are confronted with.

Further refer:(1)Business ethics and the evolution of corporate

responsibility; Gael McDonald, Chartered ccountant !ournal


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$orporation in their pursuit of pro!ts usually%-

&uin the environment'

(istreat employees'

)ell shoddy and dangerous products'

*roduce immoral advertisements'

$orrupt the political process.


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Business ethics and law

The main device for checking corporate misdeeds+ the law.

#owever, the legal regulation being an importantelement of any corporate control scheme isinsucient by itself.

)ome argue that businesses should adhere to astandard of ethical or socially responsiblebehaviour that is higher than the law.


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)takeholder theory

It is not merely striving to maimi/ation pro!ts for shareholders, acorporate should balance the interests of shareholders against theinterests of other corporate stakeholders, such as employees,

suppliers, customers and the community.

Traditional management model + managers have a !duciaryrelationship with shareholders to act in their interests.

)takeholder theory + provide a compelling reason why other groups

also have a legitimate claim on the corporation. welfare, rights. 0urther refer to articles (1)Business ethics: the state of the art, atricia *

+erhane,!M- March 1...; (") Business ethics and the evolution ofcorporate responsibility; Gael McDonald, Chartered ccountant !ournalMarch, "##$


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1e!nition of stakeholders

Free/an- can a"ect or is a"ected by theachievement of the organisation2s ob3ectives.

0van and Free/an + bene!t from or areharmed by and whose rights are violated orrespected by, corporate actions.

Clarson+ have or claim, ownership, rights orinterests in a corporation and its activities.


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)takeholder model

$orporation

)hareholders

)uppliers

$ivilsociety

4mployees

Government

$ustomers

$ompetito

rs


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4T#I$56 T#47&I4)

8. &ight theory

9. :ustice theory

;.


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&IG#T) T#47&?

&ights theory which is a deontological theories-theories that focus on decisions or actions alone.

4g% a deontological theory may !nd unacceptablethat any competent employees loses his 3ob, evenif the layo"2s e"ect is to reduce prices toconsumers and increase pro!t.

It also holds that certain humans rights arefundamental and must be respected by otherhumans. 4ach of us faces a moral compulsion notto harm the fundamental rights of others.


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)trength and criticisms Strength of Right Theory -It protects fundamental rights unless

some greater right takes precedence. 4.g. members of moderndemocratic societies have etensive liberties and rights that theyneed not fear will be taken away by their government or othermembers of society.

Criticisms of Right Theory +It is dicult to achieve agreementabout which rights are protected. 4.g. rights fundamental to womenin


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:


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5pplication &awl2s theory in the businesscontet- 3ustice theory reAuires decision makes

to be guided by fairness and impartiality. It holds that businesses should focus on

outcomes% are people getting what theydeserve>


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)trengths and $riticism

The protection of those who are least advantaged in society.

Its motives are consistent with the religious and secular

philosophies that urge humans to help those in need. (anyreligions and cultures hold basic to their faith the assistanceof those who are less fortunate.

$riticisms + it treats eAuality as an absolute withouteamining the costs of producing eAuality including reducedincentives for innovation, entrepreneurship and production.5ny attempt to rearrange social bene!ts reAuires anaccurate measurement of current wealth.


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It reAuires a decision maker to maimi/e utility forsociety as a whole.

(aimi/ing utility means achieving the highestlevel of satisfactions over dissatisfactions onsociety as a whole-the decision maker may bereAuired to do something that harms her by her

action in order to bene!t the society as a whole.

It also 3udges our actions as good or baddepending on their conseAuences + the end

3ustify the meansC.


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)trengths D criticism ?ou merely need to do what is the best for society

as a whole.


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*ro!t (aimi/ation

&eAuires a decision maker to maimi/e abusiness2s long-run pro!ts within the limits of the

law. Based in the laisse2 faire theory of capitalism by

5dam )mith.

By focusing on results + maimi/ing total socialwelfare.

*ro!t maimi/ation optimi/es total social utility byreAuiring the decision maker to make a decision

that merely maimi/es pro!ts for himself or


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)trengths

7ne2s sel!sh interest + by working in our owninterests, we compete for society2s scarceresources labour and land which are allocated to

those people and businesses that can use themmost productively.

By allocating society2s resources to their mostecient uses, as determined by a free market, we

maimise total utility or bene!ts.

If we fail to maimi/e pro!ts, some of society2sresources will be allocated to less productive usesthat reduce society2s total welfare.


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*ro!t maimi/ation results in ethical conduct +society2smember to act within the constraints of the law.

5 decision maker to consider the rights protected by rightstheory and 3ustice theory.

Ignoring important rights of employees, customers,suppliers, communities and other stakeholders maynegatively impact a corporation2s pro!t.

5 business that engages with unethical behaviour issub3ect to boycotts, adverse publicity, demands for morerestrictive laws.


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criticisms

)ub3ect to human failings that make it impossiblefor them to maimi/e corporate pro!ts.

The failure to discover and process all relevantinformation and varying levels of aversion to riskcan result in one manager making a di"erentdecision than another manager.

4ven if the pro!t maima/ation results in anecient allocation + it does not concern itself withhow wealth is allocated within society.


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To some people, wealth disparity is unacceptable.

To liberal economists, wealth disparity is

necessary component of a free market thatrewards hard work, acAuired skills, innovation andrisk taking. ability to compete.

5bility of laws and market forces to control

corporate behaviour is limited because it reAuireslawmakers, consumers, employees and others todetect unethical corporate act and takeappropriate steps.

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