Ethics in the World of Business

Topic 1a
 Ethics and Its Importance in
Business and Non-Business
Organizations
 Learning outcomes
At the end of this lecture, students should be able to:

• Recognize the importance of ethics on business.

• Rationalize the importance of code of ethics and

PETRONAS Shared Values

• Discuss why ethics is important in the world of business.

 Business Ethics
• Business Ethics is the study of what constitutes right or wrong, or good
and bad, human conduct in a business context.

• The word “business” in our context means an organization whose

objective is to provide goods and services for profit.

• Businesspeople are those who participate in planning, organizing or

directing the work of business.

• One distinguishing feature of business is its ECONOMIC character. In the

world of business, we interact with each other not as family members of
friends but as buyers and sellers, employers and employees, etc.

• In the study of Corporate/Business Ethics, however, we will take a broader

view of dwelling on issues that arise anywhere that employees and
employers come together. For e.g. discrimination, whistle-blowing, unjust
dismissal, health and safety hazards, etc.
 Code of Ethics
• Many organizations develop code of ethics to remind employees on
the importance of ethics at the workplace.

• A code is a statement of principles, policies or rules that guides

behaviour.

• Code of Ethics is defined as a social, religious or civil code of

behaviour and principles of conduct that are considered correct,
especially those of a particular group, profession or individual.
(Hanks,1979:502)
 PETRONAS Shared Values
• Loyalty
Loyalty to Nation and Corporation

• Professionalism
Committed, Innovative and Proactive and Always striving for
Excellence

• Integrity
Honest and Upright

• Cohesiveness
United in Purpose and Fellowship
 PETRONAS Brand Essence
“Energy Receive, Energy Return,
Aspiring People Everywhere”

trusted
enriching
passionate
progressive
 PETRONAS CULTURAL BELIEFS
• Results Matter
I stretch my limits to deliver superior results
• Own it!
I own the results and don’t blame others
• Focused Execution
I plan, commit and deliver with discipline
• Nurture Trust
I always keep my promise and build mutual trust
• Tell me
I seek, give and act positively on feedback
• Shared success
I collaborate for the greater good of PETRONAS
• As students of UTP and as potential
employees of PETRONAS Group of
Companies, how would you
demonstrate the PETRONAS Shared
Values and brand essence?
-
 Applying ethics in the business world
• Is ethics important in the business world?
Yes, it is important for business people to be ethical as being ethical in
business is actually no different than being ethical in private life.

• Today, business managers have many reasons to be concerned with

ethical standards of their organizations.

• The lessons learned from the collapse of Enron, Arthur Anderson, etc.
The consequences of unethical behaviour and unethical business
institutions are too serious to be ignored. (Desjardins, page 3)

• The only reservation would be that business issues are not easily
addressed by ordinary ethical reasoning. (Boatright, page
5)

• How can ethics be integrated within business?

• Which ethics should guide business decisions?
(Desjardins, page 3)
 Ethics and its Importance in Business

• The Business Environment in a Global Context

– There are a lot of challenges in the global business world.
– Apart from fulfilling the profit maximization objective which drives
aggressive competition in a free market system, businesses have to face
another challenge – managing the global workforce.
– Society is undergoing dramatic change in values and societal norms.
– There has been concerns on the decadence of moral values among the
younger generation, especially Generation Y.
– Generation Y employees who grew up in the ICT era and represent the
bulk of today’s workforce are more likely to see unethical behaviour as
justifiable in pursuit of their goals.
 Code of Ethics
• Many organisations develop a code of ethics to remind employees on the
importance of ethics at the workplace. A code is a statement of principles,
policies or rules that guides behaviour.

• A code of ethics is defined as ‘a social, religious or civil code of behaviour

and principles of conduct that are considered correct, especially those of a
particular group, profession or individual’ (Hanks,1979:502).

• Two types of code of ethics:

Compliance Integrity based

based
 Applying Ethics in
the Business World
• Is ethics important in the business world?
Yes, it is important for business people to be ethical as being ethical in
business is actually no different than being ethical in private life.

• Today, business managers have many reasons to be concerned with ethical

standards of their organisations.

• ‘The lessons learned from the collapse of Enron, Arthur Anderson, etc. and
the consequences of unethical behaviour and unethical business institutions
such as San Lu Corporation are too serious to be ignored’ (Desjardins, 2009;
Khalidah et al., 2012).

• Business ethics is not an oxymoron!

 Applying Ethics in
the Business World (continued)
• However, business issues are not easily addressed by ordinary ethical
reasoning. Economic and organizational characters of business firms
differentiate the way business issues are handled, i.e. in employer-employee
relationships, social responsibility, etc.

• Managing businesses effectively without compromising ethics is the real

challenge because it requires courage, respect for humans and non-humans,
honesty, integrity, etc. We all know these values up front, but how do we
translate them into actions?

• Ethics in the business world definitely requires a self-conscience and

altruism that we are conducting businesses not only to maximize profits for
the organization’s sustainability, but also for the well being of the ummah (as
a social responsibility) and as a matter of accountability – as a khalifah!
 Importance of Ethics
in Business
• To keep existing customers: Maintain customer loyalty and business
1 sustainability.

• To attract new customers: A good business or corporate image will attract new
2 customers and increase profitability.

• To avoid lawsuits: Maintain good image and dignity of the company by

3 complying with laws and regulations.

• To reduce employee turnover: Maintain employee loyalty and subsequently

4 increase organisational effectiveness.

• To please customers, employees and society: Strive to fulfil the needs of main
5 stakeholders, i.e. customers, employees and the community they serve.
 Ethics and Business

1. The Levels of Decision Making

2. Effective Business Decisions: An
integration of economic, legal and moral
viewpoints

Topic 1b
 Learning outcomes
At the end of this lecture, students should be able to:

• Analyze the three levels of decision making in the world

of business – individual, organization,
business system.

• Compare and contrast the three viewpoints of business

decision – economic, legal and moral.

• Recognize the importance of integrating the economic,

legal and moral viewpoints to make sound business
decisions.
 Business and Organizational Ethics
• Business Ethics is the study of what constitutes right or wrong, or good
and bad, human conduct in a business context.

• The word “business” in our context means an organization whose

objective is to provide goods and services for profit.

• Businesspeople are those who participate in planning, organizing or

directing the work of business.

• One distinguishing feature of business is its ECONOMIC character. In the

world of business, we interact with each other not as family members of
friends but as buyers and sellers, employers and employees, etc.

• In the study of Corporate/Business Ethics, however, we will take a broader

view of dwelling on issues that arise anywhere that employees and
employers come together. For e.g. discrimination, whistle-blowing, unjust
dismissal, health and safety hazards, etc.
 Conduct of Business
• Ethical issues are not only faced by managers but by all
people, includes employees, consumers and members of
the public.

• Corporate activities affect all, and so conduct of

business is a matter of concern for everyone with a
stake in ethical management.

• Ethical issues in business are closely tied up to

important matters of public policy, to legislative and
judicial processes of government.
 Business Decision Making

• In making decision, business people most of the time are

faced with questions about ethics in their relationship
with customers, employees and members of society.

• If ethically correct course of action is clear, they will act

accordingly.

• Exception occurs when there is uncertainty about ethical

obligations in particular situations or when
considerations of ethics conflict with demands of
business.
Two Distinguishing Features of Business
• One distinguishing feature of business is its
ECONOMIC character. In the world of business, we
interact with each other not as family members of
friends but as buyers and sellers, employers and
employees, etc.

• It typically takes place in ORGANIZATIONS. An

organization, according to organizational theory, is a
hierarchical system of functionally defined positions
designed to achieve some goal or set of goals.
Consequently, the members of a organization, in
assuming a particular position (e.g . sales reps,
managers, CEOs etc) take on new obligations to pursue
the goals of the firm.
 Some Challenges of Business People

 Balancing the Economic Character of Organizations with

Justice and Fairness

 Common ethical dilemmas faced by business people:

1. Conflict of interest
2. Personality traits
3. Responsibility to stakeholders
4. Level of Openness
Levels of Decision Making
Three distinctive levels:
1. Individual
2. Organization
3. Business system

Identifying the appropriate level for a decision

is important, because an ethical problem may
have no solution on the level it is approached.
 Three Points of View
• Business decision making involves many factors, ethics
is only one.

• To understand the relevancy of ethics in business

conduct; three viewpoints should be understood :

– The economic – thinking about business benefits

– The legal – thinking about administrative decision
– The moral – thinking about what is the best thing to
do
Features of Moral Point of View
1. Willingness to seek out and act on reasons
2. Requires us to be impartial – must regard
the interests of everyone including
ourselves as equally worthy of
consideration and equal weight in
deciding what to do.
 An Integrated Approach
Decision making in business involves an
integration of all three points of view.

Business ethics is the attempt to think clearly

and deeply about the ethical issues in
business and to arrive at conclusions that
are supported by the strongest possible
arguments.
 Ethics + Economics + Law
Both economics and law are critical to
business decision making and it would be
helpful to observe ethical standards as
means to the end of profit making.
 3 check questions when faced by an
ethical dilemma in business decisions

1) Is it legal?
Am I violating any law or company policy?

2) Is it balanced?
Am I acting fairly?

3) How will it make me feel about myself?

Will I be happy after taking such actions?
 In conclusion…
• All believers of religion have their own principles to
uphold such as doing good deeds and avoiding evil acts, to
be just and fair, show respect and compassion for others,
etc.

• Internalization of ethics in business comes from within

oneself, out of his self-consciousness to be ethical as a
social obligation and as a commitment to obey God’s rules
and laws above man-made laws.