MM5001

Andika Putra
Pratama
BUSINESS ETHICS

Day 2
Theories of
Ethics (P.1)
Theories of Ethics
• 1) Deontological Ethics
• 2) Consequentialism
• 3) Rights-based Ethics
• 4) Social Contract Theory
• 5) Ethical Egoism
• 6) Stakeholders Theory
• 7) Divine Command Theory
• 8) Virtue Ethics
• 9) Spirituality-Based Theory
1) Deontological Ethics
•ETHICS is based on the rightness or
wrongness of the actions themselves,
inherent in the actions themselves

Stealing
Being Honest
Lying
Killing
Hard Work
Can someone…
• Lie to customers because one needs to protect
the company’s reputation

• Lie to customers because one does not want to

harm people within the company

• Lie to customers because we are not trained

enough to understand the company’s product

LYING IS LYING…!
2) Consequentialism-Utilitarianism
•ETHICS is based on the consequences of
one’s action and/or the utility of the actions

Stealing
Being Honest
Lying
Killing
Hard Work
 advantageous and
+/- disadvantageous…

Working hard?
Laying off people?
Applying rigid work hours?
3) Rights-based Ethics
•ETHICS based on basic human rights,
either inherent rights or conventional rights,
focused on human dignity
Right to education
Right to leisure
Right to own property
Right to equality
Right to belief and religion
Right to opinion
Right to life, liberty, and personal security
Employee’s Right to Say NO…

VS
The “obligation”
to say YES
 4) Social Contract Theory
•ETHICS based on a contract between two
parties or among members of a particular
social organization

Corporate Culture
Employment
Price Setting
Contract
Purchase
Contract
A Study of Corrupt Organizational Culture
Campbell & Goritz (2014), Journal of Business Ethics
5) Ethical Egoism
•ETHICS is based on reasonable
self-interest

When is self-interest
reasonable?
Not wanting to be disturbed during
the weekend from work

Self-interest to develop oneself

Rejecting a request from a boss

due to a reasonable excuse

Self-interest to conduct business

 6) Stakeholder Theory
•ETHICS is based on consideration of
multiple stakeholders
Four Uses of Stakeholder Theory
1. Descriptive Use (stakeholders to identify and
research)
2. Instrumental Use (stakeholders as instruments to
achieve organizational goals)
3. Normative Use (stakeholders having intrinsic value)
4. Managerial Use (stakeholders to be taken to account
when making decisions)
Donaldson & Preston (1995)
The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications
Donaldson & Preston (1995)
The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications
Donaldson & Preston (1995)
The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications
7) Divine Command Theory
•ETHICS based on what God commands
human beings to do

Sources are usually religious

scriptures believed to be from
God or contains information
about what God commands
 Riba as Usury or Predatory Lending
Interest as Just Compensation

Mews, C. J., & Abraham, I. (2007). Usury

and just compensation: Religious and
financial ethics in historical
perspective. Journal of Business
Ethics, 72(1), 1-15. Are some form of
interest considered
‘Riba’?
8) Virtue Ethics
•ETHICS is based on individual moral
characters

What would “an ethical

person” be like?
In Search of Virtue
Crossan et al. (2013)
Journal of Business Ethics
9) Spirituality-based Theory
•ETHICS is based on spiritual connection,
beyond materialism
Traditional Management Spiritually Informed
Theory Management Theory

Prediction, control, Enlightenment, ego

rationalization, transcendence to
material progress, self, peace,
ego development of sustainability,
self positive evolution
 What to Prepare for Week 2

Come up with questions related to each theory and bring

them to class