WEEK 1 & 2

INTRODUCTION TO ETHICS
AFS 3103
ETHICS IN ISLAMIC FINANCE
 DEFINITION OF ETHICS

Originate from the Greek word “ethos” which

carries the meaning of character. Thus, ethics is
about dealings with the character of an
individual.

Ethics can be defined as a set of moral values

which determine the rightness and wrongness
of a person’s action.
 CONT.

Ethics serve two purposes which are:

Provides basis to evaluate an action based

on moral principles.

As a guidance to people on how to act

ethically in various situation.
 ETHICAL THEORY

Western
ethical
theories

Cognitivist Non-cognitivist

Non-
Consequentialism
consequentialism
 CONSEQUENTIALISM

Consequentialism which also known as

teleological theory determines the rightness
of an action based on the consequences of
the action.

Based on this theory, an action is considered

right if it resulted in good consequences.

Human beings are expected to act in ways

that will benefit themselves.
 NON-CONSEQUENTIALISM

Non-consequentialism which also known as

deontological theory determines the
rightness of an action regardless of the
consequences of the action, but based on
the nature of the act itself.

Based on this theory, an action is considered

wrong if the nature of the action is so even if
it causes good consequences.
 CONT.

Human beings are expected to act

according to the duty to perform the acts,
rather than the consequences of the actions.

e.g. lying is considered wrong even if it brings

benefits to a person.
ETHICAL NORMS

Ethics

Ethical
norms

Morals Laws
 MORALS

Morals can be defined as the beliefs

concerning the right or wrong and good or
bad of human behavior which are embedded
in a society or culture.

Among the factors influencing a person’s

morality are his upbringing, education, religion
and environment.

Ethics and morality are often used

interchangeably.
 LAWS

Laws can be defined as the standard of

right and wrong conduct that are enforced
legally.

Complying the laws often imply that a

person is ethical.

However, some unethical acts are not

considered wrong within the laws. Thus, a
person who obey the laws is not necessarily
an ethical person.
 TYPES OF ETHICS

Personal ethics Ethical standards of individual, and what

each individual considers right or wrong.

Cultural ethics Moral standard that are developed in a

society or a group of people.

Religious ethics Morals standards that are embedded in a

religion.

Corporate Ethical standard of a company in regard to its

ethics leaders and employees.

Professional Ethical standards applicable to the members

ethics of specific professions.
PERSONAL ETHICAL ATTITUDES

Individual
ethical
behavior

Individual Organizational
Legal factor
factor factor

- Upbringing - society-based - Code of ethics

- Socialization legal - Client charters
- Experiences interpretations - Policy
- Culture of standards statement
- Religious and values
teaching
KOHLBERG’S MODEL OF COGNITIVE
MORAL DEVELOPMENT
The moral development of a person lies in the
growth of his cognitive capacities.

Kohlberg’s model divided a person’s moral

reasoning into three levels based on the stages
in human development i.e. from childhood to
adulthood.
Pre- Conventional Post-
conventional morality conventional
morality • Stage 3 morality
• Stage 1 • Stage 4 • Stage 5
• Stage 2 • Stage 6
 CONT.

Level 1. pre-conventional morality

At this level, an individual actions are based on self-
interest in which their ethical reasoning are determined
by punishments and rewards.
Stage 1 – obedience and punishment
orientation
At this stage, children define the right and wrong of
an action based on punishments.
Stage 2 – individualism and exchange
At this stage, children define the right and wrong of
an action based on rewards.
 CONT.

Level 2. conventional morality

At this level, the moral reasoning of an individual are
based on the expectation of others.
Stage 3 – good interpersonal relationships
At this stage, teenagers define good and bad of an
action based on the approval or disapproval of
others.
Stage 4 – maintaining the social order
At this stage, teenagers define good and bad of an
action based on the law and order.
 CONT.

Level 3. principled/post-conventional morality

At this level, the moral reasoning of an individual are
based on the welfare of society members. A person at
this level can be considered as ethically matured.
 Stage 5 – social contract and individual right
Individual at this stage define right and wrong of an
action based on society’s welfare.
Stage 6 – universal principles
Individual at this stage define right and wrong of an
action based on the coherence of that particular
action with the universal ethical principles such as
fairness, justice, compassion etc.
IMPORTANCE OF ETHICS IN DAILY
LIVES

Make better
society

Enhance Equal
business treatment for
image everyone

Secured
employment
opportunity
IMPORTANCE OF ETHICS IN BUSINESS
& FINANCIAL SECTOR

Good
reputation to
business

Good Loyalty and

Corporate Ethics moral
governance strength

Positive
public
image