OUMM Topic 3 Handout

7/28/2019 OUMM Topic 3 Handout

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THE NATURE OF ETHICSIN MODERN BUSINESS


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Managerial problems are ethical

problems, because:

They represent a conflict between anorganisations economic performance and

its social performance

Managerial dilemma is to achieve a rightor proper balance between economic

and social performance

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1. Extended Consequences Results of managerial decisions do not

stop at first-level consequences, but

extend throughout society

Impact on those within and outside the

organisation, beyond the control of

managers Examples bribery, pollution, unsafe

products


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2. Multiple Alternatives

Ethical issues in management are not

dichotomous, but has several alternatives Examples

Should a manager pay bribes or not?

Should a factory pollute the air or not? Should a firm make unsafe products or not?

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3. Mixed Outcomes Ethical issues in management are not

antithetical, but has associated social

benefits and costs, as well as revenuesand expenses

Examples

Pay indirect bribe, maintain sales with promptdelivery

Pollute the air, save costs of equipment

Make unsafe product, reduce production costs

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4. Uncertain Consequences Ethical issues in management are not

deterministic, not free of risk/doubt, and

outcomes are not known Examples

Pay bribe, receive imported goods promptly

Invest in pollution-control equipment, reduce

emissions

Produce absolutely safe product, gain sales

and profit

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5. Personal Implications Ethical issues in management are not

impersonal, but involves individual/social

benefits and costs Examples

Maintain expected sales to achieve favourable

performance evaluation, despite paying higher

bribes

Delay the installation of pollution-control

equipment, and achieve planned ROI

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Market economy has limitedresources, which must be used asefficiently and effectively aspossible

EconomicAnalysis

People/organisations in ademocratic society must obeylaws established to maintainjustice

LegalAnalysis

People in society must followprinciples of beneficiency/consistency to be treated fairly

EthicalAnalysis

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2 methods to explain ethics in Islam Historical (or horizontal) method following

chronological development

Analytical/schematic (or vertical) method

of major ethical themes in Islam

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THE HOLISTIC APPROACH:

Unity of Humankind

Unity of Religion


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A comprehensive legal system based on theAl-Quran regulating every aspect of

relationships between the Creator and

humankind, and inter- personal relations

Overall guiding concept to act in a decent

and benevolent way, and to refrain from

wrongdoing

No one of you is a believer until he desiresfor his brother that which he desires for

himself.

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Free-enterprise, private-sector market

economy approach, and right of society toimpose limitations for its greater benefitRight to private property, and societys right

to eminent domainHalal (permissible) and haram (prohibited)

guidelines

Legitimacy ofprofits, and the prohibition ofriba(usury)

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Al-Quran, Chapter 2, Verse 177 says:

It is not righteousness that you turn your faces

towards East or West; but it is righteousness to

believe in God and the last day, and the angels

and the Book, and the messengers; to spend ofyour substance, out of love for Him, for your kin,

for orphans, for the needy, for the wayfarer, for

those who ask, and for the ransom of slaves; to be

steadfast in prayer, and practise regular charity; tofulfil the contracts which you have made.

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A contract is the most important bond that exists

between Muslims, as well as between Muslims and

non-Muslims as shown in the following Hadith:

The buyer and the seller have the option (of

cancelling the contract), as long as they have notseparated; then, if they both speak the truth and

make it manifest*, their transaction shall be

blessed, but if they conceal and tell lies, the

blessing of their transaction shall be obliterated.(*Any defect in an item sold must be made obvious. In caseof defects being hidden, the contract or agreement made

will be void)

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The Prophet goes on to say, The truthfullest, honest

merchant is with the prophet and the truthful ones and the

martyrs.

Obligations in good faith in line with the principles of

businessethics is required and is inseparable from thegeneral obligation of piety

Fulfillment of obligations carries the notion of rectitude,

including not taking undue advantage of another.

Fairness is deemed both a means and an end Honesty is a virtue and an expected trait for every

Muslim.

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OUMM Topic 3 Handout