2

INTERNALIZING ETHICS
IN THE CONDUCT OF
BUSINESS
 Learning Outcomes

At the end of this chapter, you should be able to:

 Recognize the theoretical models of Kohlberg and Trevino
underpinning moral development and ethical reasoning
 Identify and discuss the common ethical challenges faced by
business people
 Identify and explain the three levels of decision-making
 Differentiate between ethical management and management of
ethics
 Discuss the importance of integrating economic, legal and moral
dimensions in making effective, fair business decisions
 Identify and explain the three check questions that one has to ask
and self-assess when faced with an ethical challenge
 Discuss the role of religion in resolving ethical issues in business
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 Introduction

 There are two theoretical models, Kohlberg’s Model of

Cognitive Moral Development and Trevino’s Person-Situation
Interactionist Model of ethical reasoning.
 The ethical challenges commonly faced by business people
(balancing the economic character of organizations with
justice and fairness, conflict of interest, personality traits,
responsibility to stakeholders, level of openness) in a
corporate environment will be discussed.
 There are three levels of decision-making (the individual,
organizational and business systems).

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 Theoretical Models on Moral
Reasoning and Decision-making
 Kohlberg’s Model of Cognitive Moral Development

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 Theoretical Models on Moral
Reasoning and Decision-making
(cont.)

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 Theoretical Models on Moral
Reasoning and Decision-making
(cont.)
 Trevino’s
Person-
Situation
Interactionist
Model

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 Ethical Challenges Faced by
Business People

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 Three Levels of Decision-making

 Identifying the
appropriate level
for a decision is
important,
because an
ethical problem
may have no
solution on the
level it is
approached.

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 Ethical Management versus
Management of Ethics

 Ethical management relates to the undertaking of management

functions in an ethical manner by doing the right thing for
individual success and organizational effectiveness.
 High-level managers are responsible for creating and
maintaining an ethical corporate climate that protects the
organization against unethical and illegal conduct.
 Most managers think they are ethical, but only to some degree
of relevancy to their work. There is no difference from being
ethical in business and in private life.
 Management of ethics involve managers applying internal
policies, rules and regulations as well as stipulated government
laws to manage ethical issues.

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 Ethical Management versus
Management of Ethics (cont.)

 Managers
must also
ensure his
subordinates
comply with
the policies,
procedures
and guidelines
too.

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 Economic, Legal and Moral
Dimensions for Effective Business
Decisions
 Effective and ethical business decision-making involves an
integration of economic, legal and moral dimensions.

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 Managing Ethical Challenges

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 Religion’s Role in Resolving
Ethical Issues in Business

 All believers of religion have their own principles to uphold

such as doing good deeds and avoiding evil acts, to be just
and fair, compassionate, show respect for others, etc.
 Since most religions embody the idea of a Transcendent
Reality which has some bearing upon the purpose and
meaning of life, as well as how one lives on earth and what
lies beyond this finite, mortal existence, it also shapes how
we perceive ethics in business.
 Internalization of ethics thus comes from within one’s
conscience to be ethical as a social obligation and as a
commitment to obey God’s rules and laws above man-made
laws.
 From an Islamic perspective, it certainly requires one to
assess, reflect and relate to the fundamental principles of
iman and taqwa as Khalifah on earth.
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