Topic 1 Ethics

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 What is Ethics?
 How is ethics related to economics.
 The role of markets and market system.
 Meaning of business ethics. (ch 03 Rezaee)
 Governance, ethics and wellbeing
 Ethics from Islamic perspective
 Views of al-Ghazzali on Ethics
 Ethics may be defined as the set of moral
principles that distinguish what is right from
what is wrong.
 Ethics has a twofold objective: it evaluates

human practices by calling upon moral
standards.
 It may give prescriptive advice on how to act

morally in a given situation.
 Ethics are broadly described in the literature as moral
principles about right and wrong, honorable behavior
reflecting values, or standards of conduct.
 Honesty, openness, responsiveness, accountability,
due diligence, and fairness are core ethical principles.
 Ethics are a branch of philosophy with no clear-cut
definition of what behaviors are ethical and which are
unethical when judging one’s behavior.
 There is no general or global consensus for defining
ethical behavior for individuals, as it may change from
time to time and from one place to another place.
 There is no universal measure or standard as to what
constitutes ethical behavior.

 Philosophers and writers viewed ethics as a matter of
choice.
 Individuals must make choices in their lives. This is
important to note—businesses don't make choices. Choices
are made or implemented by individuals within the
economic enterprise.
 People in government make choices, people in educational
institutions make choices, people in businesses make
choices, people with churches make choices; everyone is
forced to make choices, and even the choice not to choose is
a decision.
Ethical problems may vary from one person to another
according to the factors influencing the Ethical Behavior:
 Legal Interpretations: In secular societies, legal
interpretations are based upon contemporary values and
standards according to time, country or situation.
 Organizational Factors: The organization too can affect or
influence participant’s behavior based on the degree of
commitment of the organization's leader conduct
 Individual Factors: Individuals come to work with different
values based on the personal values and morals, family
influences, peer influence and life experiences.
Ethical issues may vary from one organization to another
according to the factors influencing the Ethical Behavior:
conflictsof interest,
quality control issues,
discrimination in hiring and promotion,
misuse of proprietary information,
abuse of company expense accounts,
misuse of company assets,
drug and alcohol abuse,
environmental pollution, environmental destruction,
etc.
Chapter III
Chapter Objectives
 Present the definition of ethics in general and business
ethics in particular.
Recognize the need for a code of ethics that is upheld
especially by setting the right “tone at the top.”
Understand the board’s role in setting the company’s
ethical codes.
Recognize the benefits of and need for an ethical
workplace.
Identify incentive programs and their roles in promoting
an ethical workplace.
Ethics at Workplace
Business Ethics
There is increased interaction between the board of

directors, audit committees, internal auditors, external
auditors, executives, and employees in general regarding
ethical conduct in the workplace.
Business ethics are most simply described as: a process of

promoting moral principles and standards that guide
business behavior.
Code of Ethics
All organizations, regardless of their mission (e.g., profit oriented,
nonprofit) and size (large vs. small), should establish an
“Organizational Ethical Culture.” that means:
(1) Organization, which is defined as a group of individuals or

entities bound to achieve a shared goal;
(2) Ethics, which is honorable behavior conforming to the norm
of the group;
(3) Culture, which is a pattern of shared beliefs adopted by the group
in dealing with its internal and external affairs.
Business Ethics
Four different levels of business ethics have been identified based on what type
of business and how their actions are evaluated.
1. The society level, which defines ethical behavior and assesses the effect of
business on society.
2. The industry level, which suggests that different industries have their own
set of ethical standards (e.g., chemical industry vs. pharmaceutical industry)
3. The company level, under which different companies have their own set of
ethical standards
4. The individual manager level, at which each manager and other corporate
participants are responsible for their own ethical behavior
CONSEQUENTLY, one feasible way to judge ethical behavior is to focus on

determinants of business ethics and behavior such as corporate culture,
incentives, opportunities, and choices.
Corporate Culture Companies should promote a spirit of integrity that
goes beyond compliance.
Incentives Individuals within the company tend to act according

to incentives provided to them in terms of rewards
and the performance evaluation process.
Opportunities Effective corporate governance, internal controls, and

enterprise risk management can reduce the
opportunity for unethical conduct.
Choices Individuals, in general, are given the freedom to make

choices and usually choose those that will maximize
their well-being.
Sense of employee responsibility.
Freedom to raise concerns without fear of
retaliation.
Managers modeling ethical behavior and
expressing the importance of integrity.
An understanding by leadership of the pressure
points that drive unethical behavior.
Processes to find and fix these areas of pressure.
 Comply with a written code of business conduct.
 Provide sufficient training to all personnel within their
organization regarding personal responsibility under the
code.
 Encourage internal reporting of violations of the code with
the promise of no retaliation for such reporting.
 Self-govern their activities by implementing controls to
monitor compliance with all applicable laws and regulations.
 Share their best practices in implementing the DII principles
through participation in an annual Best Practices Forum.
 Be accountable to the public, particularly through the
completion of an annual Public Accountability Questionnaire.

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 Ethics has a twofold objective: it evaluates

 It may give prescriptive advice on how to act

There is increased interaction between the board of

Business ethics are most simply described as: a process of

(1) Organization, which is defined as a group of individuals or

CONSEQUENTLY, one feasible way to judge ethical behavior is to focus on

Incentives Individuals within the company tend to act according

Opportunities Effective corporate governance, internal controls, and

Choices Individuals, in general, are given the freedom to make

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