“(Ethical Principles, Quick Tests & Decision-Making Guidelines)”

 Primary Stakeholders vs Secondary stakeholders: The primary stakeholders lies within

the boundary of the firm, while secondary stakeholders lies outside.
 Primary includes; (Owners, Suppliers, Customers, Employees)
 Secondary includes; (Special-interest group, Consumer group, Environmental
groups, Society at large, Media, Local community groups)
 Ethical Reasoning and Moral decision-making:
 Ethical reasoning helps determine and differentiate between right thinking,
decisions, and actions and those that are wrong, hurtful, and/or harmful—to
others and to ourselves.
 The proper role of ethical reasoning is to highlight acts of two kinds;
 Those that enhance the well-being of others that warrant our praise.
 Those that harm or diminish the well-being of others and thus warrant our
criticism.
 Ethical reasoning involves thinking before acting and gaining an understandings of
motives before consequences occur.
 Three Criteria in Ethical Reasoning:
1. Moral reasoning must be logical. Assumptions and premises, both factual and
inferred, used to make judgments should be known and made explicit.
2. Factual evidence cited to support a person’s judgment should be accurate,
relevant, and complete.
3. Ethical standards used in reasoning should be consistent. When inconsistencies are
discovered in a person’s ethical standards in a decision, one or more of the
standards must be modified.
 Moral Responsibility Criteria: Individuals are morally responsible for the harmful
effects of their actions when.
 They knowingly and freely acted or caused the act to happen and knew that the act
was morally wrong or hurtful to others.
 They knowingly and freely failed to prevent a harmful act, and they knew it would
be morally wrong for a person to do this.
 Ethical Principles and Decision-Making: Following are the ethical decision-making
principles.
1. Ethical Relativism: (A Self-Interest Approach)
 People set their own moral standards for judging their actions.
  This form of relativism is also referred to as (naive relativism.)
 The point behind this principle is that individual standards are the basis of moral
authority.
 It also extends to cultures I:e (Cultural Relativism)
 Cultural relativism argues that, (When in Rome, Do as Romans do)
 What is morally right for one society or culture may be wrong for another.
 Moral standards vary from one culture to another
 Cultural relativists would argue that firms and business professionals doing
business in a country are obliged to follow that country’s laws and moral codes.
2. Utilitarianism: (A Consequentialist [Result Based] Approach
 The basic utilitarian view is that an action is judged as right or good on the basis of
its consequences
 Utilitarianism includes the following clauses;
 An action is morally right if it produces the greatest good for the greatest
number of people.
 An action is morally right if the net benefits over costs are greatest for all
affected, compared with the net benefits of all other possible choices
 An action is morally right if its benefits are greatest for each individual and if
these benefits outweigh the costs and benefits of the alternatives.
 There are also two types of criteria used in utilitarianism. (Rule-based and Act-
based)
 Rule-based utilitarianism argues that general principles are used as criteria for
deciding the greatest benefit to be achieved from acting a certain way.
 Act-based utilitarians, on the other hand, analyze a particular action or behavior to
determine whether the greatest utility or good can be achieved.
 Problems of the theory:
 No agreement exists about the definition of “good” for all concerned.
 No agreement exists about who decides
 The actions are not judged, but rather their consequences
 How are the costs and benefits of non-monetary stakes, such as health, safety, and
public welfare measured?
 Utilitarianism does not consider the individual. It is collective for whom the
greatest good is estimated
 The principles of justice and rights are ignored in utilitarianism
3. Universalism: (A Deontological [Duty Based] Approach
 It states that the ends do not justify the means of an action, the right thing must
always be done
 The term “(Deontology)” is derived from the Greek word (Deon) or duty
 It is also known as (Non-Consequentialist Theory)
 Regardless of consequences, this approach is based on universal principles, such as
justice, rights, fairness, honesty, and respect
 This contains two clauses;
 A person should choose to act if and only if that person thinks every person on
earth would choose the same for themselves.
 In an ethical dilemma, treat everyone involved equally
 Problems of the theory:
 These principles are imprecise and impractical.
 It is hard to resolve conflicts
 Not prioritizing one’s own duty
4. Rights: (Entitlement Based Approach) Following are the different types of rights are
included in this theory.
 Legal Rights; These are limited to a particular legal system and jurisdiction. E:g;
(The right to life, liberty, and the pursuit of happiness, and the right to freedom of
speech.)
 Moral/Human Rights; These are universal rights and based on norms in every
society E:g; (The right not to be enslaved, right to work, right to education)
 Contractual Rights; It mutually binds duties of two parties that are based on a legal
system with defined transactions and boundaries.
 There are different clauses included in the rights;
 The contract should not commit the parties to unethical conduct
 Both parties should freely enter the contractual agreement
 Individuals should not misrepresent or misinterpret facts in the contract
 Both individuals should have complete knowledge of the contract before they
are bound by it.
 Negative Rights; It refers to the duty of others that not to interfere with your right.
E:g; (If someone has right to freedom of speech, others have the duty not to
interfere with that right.)
  Positive Rights; It refers to the duty on others to provide for your needs to achieve
your goals. E:g; (The parents have the right on their child to provide him/her better
educational opportunities)
 Problems of theory:
 Manipulate, Selfish, Unjust political interests.
 Protection of one’s right at expense of others
 Limits of rights are not defined
5. Justice Theory: (Compensations, Procedures, Retributions)
 The principle of justice deals with fairness and equality.
 The moral authority that decides what is right and wrong concerns the fair
distribution of opportunities, as well as hardships to all.
 There are two principles of justice;
 The first principle states that all individuals should be treated equally.
 The second principle states that justice is served when all persons have equal
advantages to society’s opportunities and burdens.
 Problems of theory:
 Who decide who is right, who is wrong
 Who has moral authority to punish
 Opportunities and burden can they be fairly distributed.
6. Virtue Ethics Theory: (Character-Based Virtues)
 It is grounded in our character and personality traits that are deeply rooted
 It emphasizes (moral character), in compare to (moral rules and consequences.)
 Problems of theory:
 It fails to adequately address dilemmas which arise in applied ethics.
 It cannot correctly assess the changes in personality due to tragic situations.
 This theory does not provide the list of prohibited tasks.
 Character traits change, and unless we stay in practice, we risk losing our
proficiency in these areas.
 There is the problem of moral back sliding.