BCM 5102: CORPORATE GOVERNANCE & BUSINESS ETHICS

TOPIC: ETHICAL THEORIES AND FRAMEWORK FOR ORGANIZATION

ETHICS.
NAME: MULI VERONICA TWILI
B211-01-0046/2024
ANITAVERA MUTHONI KARAYA
B211-01-0047/2024
KILYUNGA MUIA MARK
B211-01-2357/2023
ETHICAL THEORIES AND FRAMEWORK FOR ORGANIZATION ETHICS.
Ethics are a set of moral canons based on well-founded moral norms that dictate what
humans should do, usually regarding rights, obligations, societal advantages, justice, or
unique qualities. Ethical theories are attempts to provide a clear account of what our ethical
requirements and obligations are. Different theories are tapped into to try and explain what
people ought to do depending on the situation and the moral dilemma.

MAJOR THEORIES IN ETHICS

Different ethical theories provide a unique perspective in ethical analysis when a person is on
the path of decision making. Four broad categories of ethical theory include deontology,
utilitarianism, rights, and virtues. They are as discussed below:
1. Utilitarianism ethical theory
The theory was founded by Jeremy Bentham(1747-1832) and John Stuat Mill (1806-
1873). The most ethical choice is the one that brings the greatest good for the greatest
number of people. It focuses on maximizing overall welfare and happiness for all
stakeholders. There are two types of utilitarianism, act utilitarianism and rule
utilitarianism.
a) Act utilitarianism-Where an action is right in and only if it produces the greater
balance of pleasure over pain for everyone. E.g. telling a lie or breaking a promise is
right if its consequences are better than those of any alternative course of action.
b) Rule utilitarianism -takes into account the law and is concerned with fairness. It is
where an action is right in and only if it confirms to generally accepted rules and
produces the greatest balance of pleasure over pain. E.g. an athlete runs and steps on
the other fellow athlete lane he/she becomes disqualified.
2. Deontological ethical theory
The theory was developed by Immanuel Kant in the 18th century. The term ‘deontological’
is derived from the Greek word ‘Deon’ which means duty. Duty or obligation is the
fundamental concept in deontological theory. It associated with Emmanuel Kant. It’s the
theory that actions are not right or wrong based on their result but rather because they are
inherently good or evil. It’s sometimes referred to as the ethics of duty. According to this
theory, certain actions are not right not due to some benefit to self or others but due to
their basic nature or the rules underlying them. E.g. Bribery is wrong by its nature
irrespective of its consequences.
3. Virtue ethical theory
It was rooted to the ancient Greek philosophy (Aristotle) and it focuses on the moral
character of individuals. The virtue ethical theory judges a person by his/her character
rather than by an action that may deviate from his/her normal behavior. It takes the
 person’s morals, reputation and motivation into account when rating an unusual and
irregular behavior that is considered unethical. An instance where this theory is used is
when a person is judged for insulting another by their demeanor as a person and whether
this is a common feature they have. If the person is not used to insulting others, the action
is judged as a unique occurrence. If the person is used to insulting others, they are
regarded as unethical.
4. Rights ethical theory
In ethical theories based on rights, the rights established by a society are protected and
given the highest priority. Rights are considered to be ethically correct and valid since a
large population endorses them. Individuals may also bestow rights upon others if they
have the ability and resources to do so. Rights-based ethics places emphasis on
respecting and protecting individual rights. Organizations utilizing this framework would
prioritize the rights of employees, customers, and other stakeholders, ensuring that
decisions and actions do not infringe upon their rights. The society has to determine what
rights it wants to uphold and give to its citizens. In order for a society to determine what
rights it wants to enact, it must decide what the society’s goals and ethical priorities are.
Therefore, in order for the rights theory to be useful, it must be used in conjunction with
another ethical theory that will consistently explain the goals of the society.
5. Social contract theory
Developed by philosophers like Thomas Hobbes, john Locke and jean Jacques in
1762 .Ethical behavior is based on implicit agreement between members of the society.
Businesses operate within a framework of societal agreements. Focuses on fulfilling
societal expectations and obligation. E.g. Engaging in CSR activities.
6. Tripple bottom line
The theory was coined by John Elkington in 1994 .It focuses on evaluating business
performance based on three p’s (people, planet and profit). It promotes a holistic approach
to business success.

Ethical principles
There are 4 ethical principles as discussed below:
a) Justice
The justice ethical principle states that decision makers should focus on actions that are fair
to those involved. This means that ethical decisions should be consistent with the ethical
theory unless extenuating circumstances that can be justified exist in the case. This involves
fairness and equality.
b) Beneficence Principle
The principle of beneficence guides the decision maker to do what is right and good. This
priority to “do good” makes an ethical perspective and possible solution to an ethical
dilemma acceptable. It stipulates that ethical theories should strive to achieve the greatest
amount of good because people benefit from the most good. This principle is mainly
associated with the utilitarian ethical theory as earlier discussed which states that we should
attempt to generate the largest ratio of good over evil possible in the world.
c) Autonomy principle
This principle states that decision making should focus on allowing people to be autonomous
— to be able to make decisions that apply to their lives to the extent that they do not harm
others or do not violate other people’s rights. This principle states that decision making
should focus on allowing people to be autonomous— to be able to make decisions that apply
to their lives to the extent that they do not harm others or do not violate other people’s rights.
According to this principle, each individual deserves respect because only he/she has had
those exact life experiences and understands his emotions, motivations, and physical
capabilities in such an intimate manner. In essence, this ethical principle is an extension of
the ethical principle of beneficence because a person who is independent usually prefers to
have control over his life experiences in order to obtain the lifestyle that he/she enjoys.
d) Non-maleficence
It is often referred to as ‘No harm principle’. In an organization, it’s involved with having
professional standards, licensure and codes of ethics and with an obligation not to place
employees at risk of harm without protection.

Implementing ethics in organizations

This can be done through:
 Corporate social responsibility.
 Ethical leadership.
 Code of ethics.
 Having ethics training programs.
 Accountability and transparency.
 Other Mechanisms to support high ethical standards are also needed - such as :
Raising concerns and reporting misconduct and including ethical criteria in
recruitment and in performance appraisals and having detailed policies outlining how
the organization deals with issues like discrimination, procurement, bribery and
corruption, gifts.
Challenges in organization ethics
1. Globalization and cultural differences - Multinational corporations may encounter
conflicting ethical norms and cultural differences in various countries where they
operate. Balancing local norms with global ethical standards can be complex.
2. Balancing profit and ethical considerations- Companies might struggle to balance
between ethical practices and social responsibilities. Example: A company might face
a decision between using cheaper, environmentally harmful materials to increase
profits and investing in sustainable alternatives that are more costly.
3. Whistle blowing and ethical dilemmas –Whistle blowing mechanism tends to create
dilemmas among employees in the organization. Example: An employee notices
within the firm, reporting could lead to 2 things: a positive change or recursions such
as job loss.
4. Ethical leadership and governance -E.g. abuse of power. Ineffective leadership can
lead to unethical behavior. Also poor governance might ignore safety protocols to cut
on cost leading to accidents.
5. Artificial Intelligence and Automation- The rise of artificial intelligence (AI) and
automation in organizations brings about ethical considerations regarding issues like
privacy concerns, and potential job displacement. Organizations must navigate these
challenges while ensuring that AI technologies are developed and deployed
responsibly and ethically.
6. Conflict of interest-It can compromise decision making leading to unethical practices.
Example: A manager who owns shares in a supply company might favor that supplier
over the others even if it is not in the best interest of the organization.
7. Environmental Sustainability: As climate change and environmental concerns become
more pressing, organizations face ethical challenges related to their environmental
impact. Adopting sustainable practices and considering the long-term consequences of
business decisions are critical for addressing these issues.