Business ethics

Professor Muhammad Azmat Awan (azmat.awan@gmail.com) MA Eco, MBA, MS Banking & Finance, Ph.D. Finance (Scholar)
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"In the name of Allah, the Beneficent, the Merciful."
"If one's today is not better than his yesterday and his tomorrow is not better than his today, he is a loser."(Prophet Muhammad ‫)ﷺ‬

 BUSINESS ETHICS
‫کاروباری‬(‫تجارتی‬)‫اخالقیا‬‫ت‬

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COMMONWEALTH OF LEARNING (COL. ) EXECUTIVE MBA/MPA
ALLAMA IQBAL OPEN UNIVERSITY (AIOU), ISLAMABAD
FOR: B.Com, BBA, BS (Honers), M.Com, MBA, ICMA, ICAP-CA, PIPFA, ICPAP-CPA,
UNIVERSITY OF THE PUNJAB, UNIVERSITY OF SARGODHA, UNIVERSITY OF GUJRAT,
BAHAUDDIN ZAKARIYA UNIVERSITY MULTAN AND ISLAMIA UNIVERSITY OF BAHAWALPUR
  
By: Professor Muhammad Azmat Awan (azmat.awan@gmail.com )
MA Eco, MBA, MS Banking & Finance, Ph.D. Finance (Research Scholar)


GVDAY ®
PUBLICATIONS (GVDAY ®
GROUP OF INDUSTRIES KHARANAY KINGRA ROAD SIALKOT)
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Unit 1: INTRODUCTION
1.1.Nature of Ethics
1.2.Moral versus Non-moral Standards
1.3.Religion and Morality
1.4.Morality and Personal Values
1.5.Individual Integrity and Responsibility
Unit 2: NORMATIVE THEORIES OF
ETHICS
2.1.Consequentialist Theories
2.2.Non-consequentialist Theories
2.3.Egoism and Utilitarianism
2.4.Kant’s Ethics
2.5.Moral Decision Making
Unit 3: ECONOMIC JUSTICE AND
CAPITALISM
3.1 Utilitarian View and Libertarian Approach
3.2 Rawls’s Theory of Justice
3.3 Capitalism: Concepts and Arguments
3.4 Criticisms of Capitalism
Unit 4: ETHICS INCORPORATIONS
4.1 Corporate Moral Agency
4.2 Rival Views of Corporate Responsibility
4.3 Debating Corporate Responsibility
4.4 Institutionalizing Ethics within Corporations
Unit 5: ETHICS FOR CONSUMERS
5.1 Product Safety
5.2 Other Areas of Business Responsibility
5.3 Deception and Unfairness in Advertising
5.4 Debate over Advertising
Unit 6: THE ENVIRONMENT
6.1.Business and Ecology
6.2.The Ethics of Environmental Protection
6.3.Achieving Our Environmental Goals
6.4.Delving Deeper into Environmental Ethics
Unit 7: THE WORKPLACE
7.1. Civil Liberties in the Workplace
7.2. Hiring and Promotions
7.3. Discipline and Discharge
7.4. Wages and Labor Unions
7.5. Ease of Doing Business
Unit 8: MORAL CHOICES FACING
EMPLOYEES
8.1.Obligations to the Firm
8.2.Abuse of Official Position
8.3.Bribes and Kickbacks
8.4.Gifts and Entertainment
8.5.Conflicting Obligations
8.6.Whistle-Blowing
8.7.Self-Interest and Moral Obligation
Unit 9: GLOBALIZATION OF ETHICAL DECISION MAKING
9.1 Capitalism, Economics and Business
Ethics
9.2 Global Business Practices
9.3 Sustainable Development
9.4 International Monetary Fund (IMF)
9.5 World Trade Organization (WTO)
9.6 The Multinational Corporation (MNC)
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Core values: Principles around which a business is established and maintained.
Communication: Interaction between two or more individuals.
Equality: Along with justice and integrity a characteristic of the holiness of God.
Politics: Politics from Greek Politiká, meaning "affairs of the cities” is the process of making
decisions that apply to members of a group.
Philosophy: The word is derived from the ancient Greek words philo, to love or to befriend, and
sophia, wisdom.
Epistemology: Epistemology derived from Greek epistēmē, meaning 'knowledge', , logos, meaning
study or to observe, so Epistemology is the branch of philosophy concerned with the prime theory
of knowledge.
Metaphysics: Metaphysics ‫انسانی‬ ‫روح‬ ‫علم‬ - ‫الطبیعیاتی‬ ‫مابعد‬ is the branch of philosophy that examines the
fundamental nature of reality, including the relationship between mind and matter, between the study
substance and attribute between possibility and actuality.
Aesthetics: Aesthetics (‫)جمالیاتی‬ is a branch of philosophy that deals with the nature, art, beauty and
taste and with the creation or appreciation of beauty of nature spreading around.
Thought or Thinking: Thought encompasses an “aim-free flow of ideas and associations that can
lead to a reality-oriented conclusion.
Theory: A theory ‫نظریہ‬ is a contemplative and rational type of abstract or generalizing thinking, or
the results of such thinking. Depending on the context, the results might, for example, include
generalized explanations of how nature works. The word has its roots in ancient Greek, but in
modern use it has taken on several related meanings.
Hypothesis: A hypothesis ‫مفروضہ‬ is a proposed explanation for a phenomenon. For a hypothesis to
be a scientific hypothesis, the scientific method requires that one can test it. The words "hypothesis"
and "theory" are often be used synonymously, a scientific hypothesis is not the same as a scientific
theory.
Logic: A Logic ‫منطق‬ - ‫استدالل‬ ‫علم‬ originally meaning "the word" or "what is spoken", but coming to
mean "thought" or "reason", is a subject concerned with the most general laws of truth, and is now
generally held to consist of the systematic study of the form of valid inference.
Strategic Plan: process of identifying major goals, policies, and strategies for an organization.
Three-E equation: efficiency + Effectiveness + Ethics = Profits + Long-term stability training: The
process of orienting employees to their job and its expectations. The third step in staffing.
Vision Statement: An expansion of the organization’s mission which provides a statement of the
perceived, achievable, and measurable future.
Mission Statement: A mission statement is a short statement of an organization's purpose, what its
overall goal is, identifying the goal of its operations: what kind of product or service it provides, its
primary customers or market, and its geographical region of operation
Value Creation: Value Creation in Managerial Economics is defined as the performance of actions
that increase the worth of goods, services or even a business.
Value Addition: The amount by which the value of an article is increased at each stage of its
production, exclusive of initial costs.
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Unit- 1: INTRODUCTION BUSINESS ETHICS OR BUSINESS ETIQUETTE ‫آداب‬ OR
CORPORATE SOCIAL RESPONSIBILITY: The word “ethics” is derived from the Greek word
ethos “character” or “way of living”, ethics is a branch of philosophy that is concerned with human
conduct. It consists in a code of conduct of human beings living in a society. Business ethics
(corporate ethics) is the study of business situations activities and decisions where issues of right and
wrong are addressed. Business ethics are moral principles that guide the way a business behaves.
The same principles that determine an individual’s actions also apply to business.
David Mackenzie defines ethics as “the study of what is right or good in human conduct” or the
“science of the ideal involved in human life”. So, it is clear that ethics is the study which determines
rightness or wrongness of actions.
Acting in an ethical way involves distinguishing between “right” and “wrong” and then making the
“right” choice. It is relatively easy to identify unethical business practices. For example, companies
should not use Child Labor, should not unlawfully use copyrighted materials and processes and
should not engage in bribery.
The following list of principles incorporates the characteristics and values that most people associate
with ethical behavior.
1. Honesty: Ethical executives are honest and truthful in all their dealings and they do not
deliberately mislead or deceive others by misrepresentations, overstatements, partial truths, selective
omissions, or any other means.
2. Integrity: Ethical executives demonstrate personal integrity and the courage of their convictions
by doing what they think is right even when there is great pressure to do otherwise; they are
principled, honorable and upright; they will fight for their beliefs.
3. Promise-Keeping & Trustworthiness: Ethical executives are worthy of trust. They are candid
and forthcoming in supplying relevant information and correcting misapprehensions of fact, and they
make every reasonable effort to fulfill the letter and spirit of their promises and commitments.
4. Loyalty: Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons and
institutions by friendship in adversity, support and devotion to duty. They are loyal to their
companies and colleagues and if they decide to accept other employment, and refuse to engage in
any activities that take undue advantage of their previous positions.
5. Fairness: Ethical executives and fair and just in all dealings; they do not exercise power
arbitrarily, and do not use overreaching nor indecent means to gain or maintain any advantage nor
take undue advantage of another’s mistakes or difficulties.
6. Concern for Other: Ethical executives are caring, compassionate, benevolent and kind; they like
the Golden Rule, help that in need, and seek to accomplish their business objectives in a manner that
causes the least harm and the greatest positive good.
7. Respect for Others: Ethical executives demonstrate respect for the human dignity, autonomy,
privacy, rights, and interests of all those who have a stake in their decisions; they are courteous and
treat all people with equal respect and dignity regardless of gender, race or national origin.
8. Law Abiding: Ethical executives abide by laws, rules and regulations relating to their business
activities.

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9. Commitment to Excellence: Ethical executives pursue excellence in performing their duties, are
well informed and prepared, and constantly endeavor to increase their proficiency in all areas of
responsibility.
10. Leadership: Ethical executives are conscious of the responsibilities and opportunities of their
position of leadership and seek to be positive ethical role models by their own conduct and by
helping to create an environment in which principled reasoning and ethical decision making are
highly prized.
11. Reputation and Morale: Ethical executives seek to protect and build the company’s good
reputation and the morale of its employees by engaging in no conduct that might undermine respect
and by taking whatever actions are necessary to correct or prevent inappropriate conduct of others.
12. Accountability: Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and omissions to themselves, their colleagues, their companies, and
their communities.
1.1. Nature of Ethics: Ethics aims at systematic knowledge so ethics is a science. Every science is
concerned with a particular sphere of nature. As a science ethics has its own particular sphere; it
deals with certain judgments that make about human conduct. It deals with systematic explanation of
rightness or wrongness in the light of the highest good or absolute good of man.
1.1.1. Ethics is applied to Human Beings only as they have freedom of choice
and means of free will.
1.1.2. Ethics is more a Science than an art, because it is systematic knowledge
about moral and behavior and conduct of human beings.
1.1.3. Ethics deals with Human Conduct which is voluntary not forced by
circumstances or humans.
1.1.4. Ethics is normative science. Normative science involves arriving at
moral standards that regulates right and wrong Conduct. It includes behavior, norms, morality,
rituals (‫ریت‬ ‫یا‬ ‫)رسم‬ and legacy etc.
Ethics, which is honorable behavior conforming to the norm of the group;
Culture, which is a pattern of shared beliefs adopted by the group in dealing with its internal and
external affairs. Ethics is essentially related to all other branches of knowledge like sociology,
political science, jurisprudence, law and legal study, psychology, anthropology, culture study,
ecology and environmental study, economics, religion, aesthetics and other similar areas.
1.2. Scope of Ethics: The scope of ethics includes whatever has reference to free human acts,
whether as principle or cause of action law, conscience, virtue, or as effect or circumstance of action
merit, punishment, etc. Ethics discusses the nature of human freedom. Ethics is essentially related to
all other branches of knowledge like sociology, political science, jurisprudence, law and legal study,
psychology, anthropology, culture study, ecology and environmental study, economics, religion,
aesthetics and other similar areas. Ethics is concerned with political, sociological, cultural, psychical,
economic, environmental, religious problems in pursuit of highest good. So these problems have an
additional place in the scope of ethics. With the emergence of new technology there is scope for
widening the scope of ethics to address new issues.
1.3. Importance of Business Ethics: Ethical problems and phenomena arise across all the functional
areas of companies and at all levels within the company.
1.3.1. Ethics in Compliance: Compliance is about obeying and adhering to rules and authority.
An ethical climate in an organization ensures that compliance with law is fuelled by a desire to

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abide by the laws. Organizations that value high ethics comply with the laws not only in letter but
go beyond what is stipulated or expected of them.
1.3.2. Ethics in Finance: The ethical issues in finance that companies and employees are
confronted with include:
 In accounting – window dressing, misleading financial analysis.
 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial markets.
 Bribery, kickbacks, over billing of expenses, facilitation payments.
 Fake reimbursements  Executive compensation.
1.3.3. Ethics in Human Resources: Human resource management (HRM) plays a decisive role
in introducing and implementing ethics. Ethics should be a pivotal issue for HR specialists. The
ethics of human resource management (HRM) covers those ethical issues arising around the
employer-employee relationship, such as the rights and duties owed between employer and
employee. The issues of ethics faced by HRM include:
 Discrimination issues i.e. discrimination on the bases of age, gender, race, religion, creed,
disabilities, weight etc.
 Any kind of gender harassments actions.
 Issues surrounding the representation of employees and the democratization of the
workplace, trade inaction.
 Issues affecting the privacy of the employee: workplace surveillance, drug testing.
 Issues affecting the privacy of the employer: whistle-blowing.
 Issues relating to the fairness of the employment contract and the balance of power between
employer and employee.
 Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The boom of
performance-related pay systems and flexible employment contracts are indicators of these newly
established forms of shifting risk.
1.3.4. Ethics in Marketing: Marketing ethics is the area of applied ethics which deals with the
moral principles behind the operation and regulation of marketing. The ethical issues confronted in
this area include:
 Pricing: price fixing, price discrimination, price skimming.
 Anti-competitive practices like manipulation of supply, exclusive dealing arrangements,
tying arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.
1.3.5. Ethics of Production: This area of business ethics deals with the duties of a company to
ensure that products and production processes do not cause harm. Some of the more acute dilemmas
in this area arise out of the fact that there is usually a degree of danger in any product or production
process and it is difficult to define a degree of permissibility, or the degree of permissibility may
depend on the changing state of preventative technologies or changing social perceptions of
acceptable risk.
 Defective, addictive and inherently dangerous products and
 Ethical relations between the company and the environment include pollution, environmental
ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically modified food
 Product testing ethics.
The most systematic approach to fostering ethical behavior is to build corporate cultures that link
ethical standards and business practices.

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1.4. Moral Versus Non-Moral Standards: Morality may refer to the standards that a person or a
group has about what is right and wrong, or good and evil. Accordingly, moral standards are those
concerned with or relating to human behavior, especially the distinction between good and bad or
right and wrong behavior.
Moral standards involve the rules people have about the kinds of actions they believe are morally
right and wrong, as well as the values they place on the kinds of objects they believe are morally
good and morally bad. Some ethicists equate moral standards with moral values and moral principles.
Non-moral standards refer to rules that are unrelated to moral or ethical considerations. Either these
standards are not necessarily linked to morality or by nature lack ethical sense. Basic examples of
non-moral standards include rules of etiquette, fashion standards, rules in games, and various house
rules.
1.5. Ethical Leadership: Ethical leadership expands much farther than simply increasing production
and profits for an organization. Applying ethics to leadership and management styles involves
considering ethics when making decisions and setting boundaries within an organization as well as
when developing ideas. Making decisions based on the core values of an individual or a code of
ethics set by an organization as a whole ultimately inspires employees to do the same, creating a
productive and positive environment. Ethical leadership is a form of leadership in which individuals
demonstrate conduct for the common good that is acceptable and appropriate in every area of their
life. So ethical leaders always know how to do the right thing. It may be difficult to define
exactly what “right” is, but a leader who is ethical is not afraid to do what they truly believe to
be right even if it is unpopular, unprofitable, or inconvenient.
Following are some ethical leadership characteristics:
1. Justice: An ethical leader is always fair and just. They have no
favorites, and treat everyone equally. Under an ethical leader, no
employee has any reason to fear biased treatment on the basis of
gender, ethnicity, nationality, or any other factor.
2. Respect Others: One of the most important traits of ethical
leadership is the respect that is given to followers. An ethical leader
shows respect all members of the team by listening to them
attentively, valuing their contributions, being compassionate, and
being generous while considering opposing viewpoints.
3. Honesty: It goes without saying that anyone who is ethical will also be honest and loyal.
Honesty is particularly important to be an effective ethical leader, because followers trust
honest and dependable leaders. Ethical leaders convey facts transparently, no matter how
unpopular they may be.
4. Humane: Being humane is one of the most revealing traits of a leader who is ethical and
moral. Ethical leaders place importance in being kind, and act in a manner that is always
beneficial to the team.
5. Focus on Teambuilding: Ethical leaders foster a sense of community and team spirit within
the organization. When an ethical leader strives to achieve goals, it is not just personal goals
that they’re concerned about. They make genuine efforts to achieve goals that benefit the entire
organization – not just themselves.

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6. Value Driven Decision-Making: In ethical leadership, all decisions are first checked to
ensure that they are in accordance with the overall organizational values. Only those decisions
that meet this criterion are implemented.
7. Encourages Initiative: Under an ethical leader, employees thrive and flourish. Employees
are rewarded for coming up with innovative ideas, and are encouraged to do what it takes to
improve the way things are done. Employees are praised for taking the first step rather than
waiting for somebody else to do it for them.
8. Leadership by Example: Ethical leadership is not just about talking the talk, this type of
leader also walks the walk. The high expectations that an ethical leader has of employees are
also applicable on the individual level. Leaders expect others to do the right thing by leading
from example.
9. Values Awareness: An ethical leader will regularly discuss the high values and
expectations that they place on themselves, employees, and organization this will ensure that
there is consistent understanding across the organization.
10. No Tolerance for Ethical Violations: An ethical leader expects employees to do the right
thing at all times, not just when it is convenient for them. Don’t expect a leader of such high
values to overlook or tolerate ethical violations.
1.6. Religion and Morality: Morality and religion is the relationship between religious views
and morals. Many religions have value frameworks regarding personal behavior meant to guide
adherents in determining between right and wrong. The Triple Gems of Jainism Islam's Sharia,
Catholicism's Canon Law, Buddhism's Eight fold Path, and Zoroastrianism's "good thoughts, good
words, and good deeds" concept, among others.
Religion: Oxford Dictionary defines religion as the belief in and worship of a superhuman controlling
power, especially a personal God or gods. Some Definitions of Religion are following:
"Religion is the belief in Spiritual Beings" (Edward B Tyler,)
"By religion, then, I understand a propitiation or conciliation of powers superior to man which are
believed to direct and control the course of nature and of human life" (James George Frazer).
"Religion is a means of ultimate transformation and/or orientation." (Joseph Adler)
A religious tradition has at least three essential elements, each handed down and developed in the
multitude of ways traditions transmit. One element is a mythic, philosophical, or theological ‫ذات‬ ‫علم‬
cosmology defining the fundamental structures and limits of the world and forming the basic ways in
which cultures and individuals imagine how things are and what they mean. A second essential
element of religion is ritual. “Rituals are a finite set of repeatable and symbolize actions that
epitomize ‫اختصار‬ things a tradition takes to be crucial to defining the normative human place in the
cosmos ‫ظاہر‬ ‫-عالم‬ ‫”.کائنات‬ The third essential element is that a tradition has some conception and
practical procedures for fundamental transformation aimed to relate persons harmoniously to the
normative cosmological elements, a path of spiritual perfection.
Morality ‫:پارسائی‬ Morality concerned with the principles of right and wrong behavior. Morality is the
quality of being in accord with standards of right or good conduct or a system of ideas that fall into
those same categories. So Morality can be a body of standards or principles derived from a code of
conduct from a particular philosophy, religion or culture, or it can derive from a standard that a
person believes should be universal.
It is a complex system of general principles and particular judgments based on cultural, religious, and
philosophical concepts and beliefs. Cultures and or groups regulate and generalize these concepts,

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thus regulating behavior. When someone conforms to the codification, you consider this person to be
moral. Yet even though morals can vary from person to person, religion to religion, and culture to
culture, many are universal, as they stem from basic human emotions. We may think of moralizing as
an intellectual exercise, but more frequently it's an attempt to make sense of our gut instincts.
1.7. Morality and Personal Values: Values are the rules by which we make decisions about right
and wrong, should and shouldn't, good and bad. They also tell us which are more or less important,
which is useful when we have to trade off meeting one value over another. Morals are judgments,
standards and rules of good conduct in the society. They guide people toward permissible behavior
with regard to basic values. Morals are judgments, standards and rules of good conduct in the society.
They guide people toward permissible behavior with regard to basic values.
Personal Values: Personal values are Code of ethics and belief system of an individual. Here are
some criteria that might help in selecting your personal core values.
 Consistent with my personal vision, mission, and core beliefs - In addition to specific
goals/source requirements, can use these criteria as a way to eliminate personal values that are
inconsistent with other decisions.
 Inspirational - Personal values encourage fulfilling purpose in life. Great personal values, read
every day, will provide an uplift and motivation to take on the day's challenges.
 Unique - Values need to speak don't hesitate to use values learned from others, but core values
should help to define priorities of life and will tend to emphasize strengths while compensating for
weaknesses.
 Provides Guidance - Personal core values helps in everyday decisions, particularly with
relationships.
 Long Lasting - This is about creating future values will evolve as grow, mature and gain life
experience. However, this is not about following the latest fad.
 Meaningful and Rewarding - Values provide the measures that help us live meaningful lives
that fulfill our given purpose. Living a life of meaning brings us joy.
1.8- Individual Integrity and Responsibility:
The integrity and Responsibility hypothesis assumes that individual leaders of integrity can create a
consensus around a culture of integrity within a corporation. This culture of integrity, in turn, will
create a highly-valued work environment; the corporation will operate with its focus on the long-run
good of its customers, employees and investors; and, as a result of this focus, the corporation will
excel in terms of financial performance when compared to its peers.
The Individual integrity defines as a concern for “accuracy, honesty, and truthfulness”. Basically, try
to ensure that when people are talking to us, they don’t come to believe things that are untrue.
Integrity is a prerequisite to personal success and for developing leadership skills. Individuals that
have integrity build trust in their relations with others; they become valued as friends, colleagues,
mentors, and supervisors. They are respected and counted on to do what is right. They are able to
balance respect and responsibility, and they are able to share their values with others. At the corporate
level, it takes individuals of integrity to develop a consensus around shared values. They must be able
to discuss these values openly as well as live the values they espouse. As this consensus builds, the
corporation develops a culture of integrity. This culture impacts the interpersonal relationships within
the company and creates a highly valued work environment. Employees are motivated and creative,
take pride in their work, and enjoy their coworkers. The culture of integrity also impacts the actions
and policies of the leadership team and the quality of the corporate governance system.
1.8. Workplace Spirituality & Law of Giving: Workplace spirituality or spirituality in the
workplace is a movement that began in the early 1920s. It emerged as a grassroots movement with
individuals seeking to live their faith and/or spiritual values in the workplace. Spiritual or spirit-

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centered leadership is a topic of inquiry frequently associated with the workplace spirituality
movement.
“A spiritual culture that recognizes that employees have both a mind and a spirit seek to find meaning
and purposes in their work, and desire to connect with other employees and be part of a community.”
Characteristics of Spiritual Organizations:
 Strong Sense of Purpose: Organizational members know why the organization exists and what it
values.
 Focus on Individual Development: Employers are valuable and need to be nurtured to help them
grow. These characteristics also include a sense of job security.
 Trust and Openness: Organizational member relationships are characterized by mutual trust,
honesty and openness.
 Employee Empowerment: Employees are allowed to a make work related decisions that affect
them, highlighting a strong sense of delegation of authority.
 Toleration of Employee Expression: The organization culture encourages employees to be
themselves and to express their moods and feelings without guilt or fear of reprimand.
Law of Giving: The Law of Giving and Receiving, is based on the fact that everything in the
universe operates through dynamic exchange. Every relationship is one of give and take because
giving and receiving are different aspects of the flow of energy in the universe. “The most powerful
forms of giving are nonmaterial the gifts of caring, attention, affection, appreciation and love are
some of the most precious gifts you can give and they don’t cost you anything,” Give first before you
receive. Whatever energy you give will come back to you in an amazing way. Say, “Good
Morning” to the people you see on your way to work; look at them, smile at them, hold the
door, wish them a silent blessing. Call a friend and tell them how much they mean to you.
Tell your children how much they have lovingly impacted your life. Make more eye
contact, listen more, and bring someone you love a flower, a compliment, a prayer.
1.9. Towards Islamic Business Ethics: The purpose of the Islamic Law is for humans to
achieve happiness in this world and the hereafter. Islam is more than just a religion in the
spiritual sense of the word; it is a way of life. Islam places the highest emphasis on ethical
values in all aspects of human life and there is no difference between the sphere ‫مدار‬ of worship
and the sphere of business.
“You are the best of peoples, evolved for mankind, enjoining what is right, forbidding
what is wrong, and believing in Allah”. (Qur’an 3: 110)
Islam places the highest emphasis on ethical values in all aspects of human life. In Islam, ethics
governs all aspects of life. Ethical norms and moral codes discernable from the verses of the Holy
Qur’an and the teachings of the Prophet (sws) are numerous, far reaching and comprehensive.
Islamic teachings strongly stress the observance of ethical and moral code in human behavior. Moral
principles and codes of ethics are repeatedly stressed throughout the Holy Qur’an. Besides, there are
numerous teachings of the Prophet (sws) which cover the area of moral and ethical values and
principles.
Says the Holy Qur’an: You are the best nation that has been raised up for mankind; you enjoin right conduct,
forbid evil and believe in Allah. (3:110)
The Prophet (sws) also says: I have been sent for the purpose of perfecting good morals. (Ibn Hambal 8595)
The Prophet (sws) is reported to have said: The truthful merchant is rewarded by being ranked on the Day of
Resurrection with prophets, veracious souls, martyrs and pious people. (Tirmidhi: 1130)
The wages of the laborers must be paid before the sweat dries upon his body. (Ibn Majah 2434)
The historical words, known as Khutbah Hajjat-ul-Wada (The Last Sermon), of the Holy Prophet
(PBUH), which were impactful on the United Nations 1949 Charter. The UN Charter and the Last
Sermon of the Pophet Muhammad (PBUH) have many similarities. The last sermon of the Prophet
(PBUH) mentions here that the Prophet mentioned first of all the nature of the origin of the human
being which shows the importance of how all humans were created equally. He (PBUH) pointed out

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Adam and Eve, meaning that human beings are equal in creation, respect, feelings, and all manners,
from the very beginning.
The Last Sermon of the Prophet (PBUH) The United Nations Charter
“All mankind is from Adam and Eve. An Arab has
no superiority over a non-Arab, nor does a non-
Arab have any superiority over an Arab; white has
no superiority over black, nor does a black have
any superiority over white; [none have superiority
over another] except by piety and good action.”
Article 1: The Purposes of the United Nations
include:
1. To develop friendly relations among
nations based on respect for the principle of equal
rights and self-determination of peoples, and to take
other appropriate measures to strengthen universal
peace;
2. To achieve international co-operation in
promoting and encouraging respect for human
rights and for fundamental freedoms for all without
distinction as to race, sex, language, or religion.
“O People, it is true that you have certain rights
with regard to your women, but they also have
rights over you. Remember that you have taken
them as your wives only under a trust from God
and with His permission. If they abide by your right
then to them belongs the right to be fed and clothed
in kindness. Do treat your women well and be kind
to them for they are your partners and committed
helpers.”
Article 1 A: The Purpose of the United Nations
includes:
To achieve international co-operation in
promoting and encouraging respect for human
rights and for fundamental freedoms for all without
distinction as to race, gender, language, or religion.
“Beware; no one committing a crime is responsible
for it but himself. Neither the child is responsible
for the crime of his father, nor is the father
responsible for the crime of his child.”
Preamble: We the people of the United Nations are
determined:
To promote social progress and better standards of
life in larger freedom
“Behold! All practices of the days of ignorance are
now under my feet. The blood revenges of the days
of ignorance are remitted. The first claim on blood
that I abolish is that of Ibn Rabi’ah bin Harith who
was nursed in the tribe of Sa’ad and whom the
Hudyayls killed. All interest and usurious dues
accruing from the time of ignorance stand wiped
out. And the first amount of interest that I remit is
that which Abbas bin Abd-al-Muttalib had
received. Verily it is remitted entirely.”
Preamble We the people of the United Nations are
determined:
To practice tolerance and live together in peace
with one another as good neighbors.
“O People, just as you regard this month, this day,
and this city as Sacred, so regard the life and
property of every Muslim as a sacred trust. Return
the goods entrusted to you to their rightful owners.
Treat others justly so that no one would be unjust to
you. Remember that you will indeed meet your
Lord, and that He will indeed reckon your deeds
your capital is yours to keep. You will
neither inflict nor suffer inequity. O People, Allah
has given rights to the people who deserve their
rights.”
Article 1: To maintain international peace and
security, and to bring about by peaceful means, and
in conformity with the principles of justice and
international law, adjustment or settlement of
international disputes or situations which might
lead to a breach of the peace;
Article 2: All Members shall settle their
international disputes by peaceful means in such a
manner that international peace and security, and
justice, are not endangered.

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1.10- Objectives of the Islamic Shariah (Maqasid-E Shari’At): ‫الشريعة‬ ‫مقاصد‬ Reading through the
sources of Shariàh, i.e., the Glorious Qur'an and the tradition of Allah's Messenger (sws), one would
find that Shariàh promotes a set of values through all of its teachings, rulings, laws, and guidance.
Erudite scholars found a reason and wisdom behind what it teaches and there is a set of major
objectives it aims to achieve. Muslim scholars such as Imam Abu Hamid Al-Ghazali and Ash-Shatibi
paid special attention to the values and objectives of Shariàh.
Those objectives are explicitly mentioned in some Shariàh rulings. They are also implicitly
understood through deep examination of the Qur'an and the Sunnah of the Prophet (sws). Scholars
expended great effort to come up with a set of major objectives Islamic Shariàh aims to achieve.
Though written and articulated differently, almost all of them arrive at a very similar set of objectives.
Sheikh Mohamed Abu Zahra stated that Shariàh came as a mercy to humanity. This mercy
demonstrates itself in achieving three major goals: nurturing the righteous individual, establishing
justice, and realization of benefits. (Sheikh Mohamed Abu Zahrah, Usul Al-Fiqh)
Protection of Religion: Because religion is the main reformer in every aspect of human life, it was
normal for laws to protect it, considering it one of human rights and the most important right, by
making laws that help to protect it from everything might affect it.
Protection of Life: Life is Allah’s (S.W) gift to human, and no one has the right to trespass it, even
the person himself; Allah (S.W) creates humans and honors them to perform His (S.W) tasks on
earth, and to test their capabilities of performing of worshipping Him (S.W). Islam protected
humanity by its laws. It obligates the community to look after the poor and give them the basic needs,
shelter, food, drink, clothing and other needs of life.
Protection of Intellect: The mind, the ability to reason, and the ability to understand are properties
of humanity, which Allah (S.W) gives to us and honors us above the other creations.
Protection of Progeny: Reproduction is the means that keeps human species in existence; Allah
(S.W) calls humans to keep their progeny ‫نسل‬ by forming families through marriage, which Islam
considers is the only lawful way of having children and maintaining our species.
Conclusion: In modern times business ethics has become a major topic of discussion among business
communities and other related organizations. The Islamic ethical codes, on the contrary, are humane
rather than utilitarian or relative. They are good for all times and absolute. Ethical and moral codes in
Islam are part of the overall Islamic faith and observing them will not only lead to a happy state of
affairs in this world but also holds the promise of manifold returns in the Hereafter. Islamic ethical
and moral codes thus create a sense of responsibility and accountability in the minds of the believers,
be they buyers or sellers. Islamic ethical framework is repeatedly stressed throughout the Holy
Qur’an and the teachings of the Prophet and encompass all spheres of life including business
financial dealings and obligations. The fundamental codes of moral behavior such as truthfulness,
trustworthiness, generosity and leniency, adherence to business commitments and contracts, fair
treatment of workers, avoidance of evil practices provide, to a large extent, the general background of
Islamic business ethics. The writer believes that there is a pressing need to study and implement
Islamic moral values in the context of the present day business situations.
--
“Don’t compare yourself with anyone in this world…if you do so, you are
insulting yourself.” (Bill Gates)


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
Unit- 2: NORMATIVE THEORIES OF ETHICS ( ‫نظریات‬ ‫بند‬ ‫:)معیار‬ Normative generally means
relating to an evaluative standard. In philosophy, normative statements make claims about how things
should or ought to be, how to value them, which things are good or bad, and which actions
are right or wrong.
Normative claims are usually contrasted with positive i.e. descriptive, explanatory, or constative
claims when describing types of theories, beliefs, or propositions. In the social sciences, the term
"normative" has broadly the same meaning as its usage in
philosophy, but may also relate, in a sociological context, to the
role of cultural 'norms'; the shared values or institutions
that structural functionalists regard as constitutive of the social
structure and social cohesion.
1. Normative Theories of Ethical
2. Traditional Ethics
3. Contemporary Ethics
Normative Ethics: Normative ethics seeks to set norms or standards for conduct is a part of moral
philosophy, or ethics, concerned with criteria of what is morally right and wrong. It includes the
formulation of moral rules that have direct implications for what human actions, institutions, and
ways of life should be like. The two major types of theories are Consequentialist and
Nonconsequentialist. Consequentialist theories say that what makes an action right is its
consequences. Nonconsequentialist moral theories say that the rightness of an action does not depend
entirely on its consequences. Consequentialist theories include utilitarianism (both act- and rule-
utilitarianism) and ethical egoism; nonconsequentialist theories include Kant’s theory, natural law
theory, and divine command theory.
2.1- Consequentialist Theories or Consequentialism ‫نتیجتہ‬ : The term "consequentialism" was coined
by Elizabeth Anscombe (1919-2001) in her 1958 essay "Modern Moral Philosophy", as
a pejorative description of what she saw as the central error of certain moral theories It then came to be
adopted by both sides of the argument. Consequentialism is an approach to Ethics that argues that the
morality of an action is contingent on the action's outcome or consequence. Thus, a morally
right action is one that produces a good outcome or result, and the consequences of an action or rule
generally outweigh all other considerations i.e. the ends justify the means.
Consequentialism is sometimes criticized because it can be difficult, or even impossible, to know
what the result of an action will be ahead of time. Indeed, no one can know the future with certainty.
Also, in certain situations, consequentialism can lead to decisions that are objectionable, even though
the consequences are arguably good.

Page | 14
2.2- Egoism and Utilitarianism: Two examples of consequentialism are Egoism, Utilitarianism and
Hedonism. Utilitarianism judges consequences by a “greatest good for the greatest number” standard.
Hedonism, on the other hand, says something is “good” if the consequence produces pleasure or
avoids pain.
Egoism: Egoism, which holds that an action is right if it maximizes good for the self. Thus, Egoism
may license actions which are good for an individual even if detrimental to the general welfare.
Hedonism: Hedonism is the belief that pleasure, or the absence of pain, is the most important
principle in determining the morality of a potential course of action.
Utilitarianism: Utilitarianism is an ethical theory that determines right from wrong by focusing on
outcomes. It is a form of consequentialism. Utilitarianism holds that the most ethical choice is the one
that will produce the greatest good for the greatest number. It is the only moral framework that can be
used to justify military force or war. It is also the most common approach to moral reasoning used in
business because of the way in which it accounts for costs and benefits.
2.3 Non-Consequentialist Theories or Non-consequentialism: Non-Consequentiality Theories is a type
of normative ethical theory that denies that the rightness or wrongness of our conduct is determined solely by
the goodness or badness of the consequences of our acts or of the rules to which those
acts conform.
Kant’s moral theory is perhaps the most influential of all non-consequentialist
approaches. In his view, right actions have moral value only if they are done
with a good will for duty’s sake alone. The meat of Kant’s theory is the
categorical imperative, a principle that he formulates in three versions. The
first version says that an action is right if you can will that the maxim of an
action become a moral law applying to all persons. An action is permissible if
(1) its maxim can be universalized (if everyone can consistently act on it) and
(2) you would be willing to have that happen. The second version of the categorical imperative says
that we must always treat people as ends in themselves and never merely as a means to an end.
Any ethical theory which bases moral judgment not on the outcomes (consequences) of an action but
on its principle (intrinsic properties) or on the agent’s character.
Deontology: An ethical theory which bases moral judgment on the moral principle (duty) underlying
the action, and thus the action’s intrinsic features, is called Deontological.
 Morality is a matter of duty, compliance to a moral law
 Whether something is right or wrong doesn’t depend on its consequences
 Actions are right or wrong in themselves
 We have duties regarding our own actions
The ethical theories proposed by I. Kant and W. D. Ross are called deontological philosophies
because they assume the moral value of an action to depend on the agent’s intention relative to it
namely, complying with the moral principle rather than its consequences.
The Agent’s Virtue: According to a Virtue Theory, the central moral concept is that of the morally
good character or morally good disposition. It analyzes the rightness or wrongness of individual
choices indirectly in terms of the character or dispositions of the agent making the choices “Virtue
ethics contends that morally correct actions are those undertaken by actors with virtuous characters.
Therefore, the formation of a virtuous character is the first step towards morally correct behavior.”
(Crane & Matten, 2010)
Altruism: Altruism means acting in the best interest of others rather than in one’s own self-interest.
Some people believe altruism constitutes the essence of morality. People’s moral judgments are often

Page | 15
driven by emotion. And empathy for others seems to encourage altruism. Another emotion, called
“elevation,” appears to inspire altruistic behavior, too. We feel elevation when we see another person
act virtuously, such as by helping someone in need. Altruism also builds social connections. For
example, studies show that people who are altruistic tend to be happier, to be healthier, and to live
longer.
Behavioral Ethics: Behavioral ethics is the study of why people make the ethical and unethical
decisions that they do. Its teachings arise from research in fields such as behavioral psychology,
cognitive science, and evolutionary biology. Behavioral ethics is different from traditional
philosophy. Instead of focusing on how people ought to behave, behavioral ethics studies why
people act as they do. Arguably, it is more useful to understand our own motivations than to
understand the philosophy of Aristotle. Research in behavioral ethics finds that people are far from
completely rational. Most ethical choices are made intuitively, by feeling, not after carefully
analyzing a situation.
Bounded Ethicality: Bounded ethicality is the idea that our ability to make ethical choices is often
limited or restricted because of internal and external pressures. For example, outside pressures, such
as the tendency to conform to the actions of those around us, can make it hard to do the right
thing. So can internal biases, such as the self-serving bias, which often causes us to subconsciously
favor ourselves at the expense of others.
2.4- Kant’s Ethics: Immanuel Kant (1724-1804) is one of the most influential philosophers in the
history of Western philosophy ‫.فلسفی‬ His contributions to metaphysics ‫الطبیعیاتی‬ ‫,مابعد‬ epistemology
‫نظریہ‬ ‫,علم‬ ‫علمیات‬ ethics, and aesthetics ‫جمالیاتی‬ have had a profound impact on almost every
philosophical movement that followed him. Kant argued that the supreme principle of morality is a
standard of rationality that he dubbed the “Categorical Imperative” (CI). Kant’s theory is an example
of a deontological ‫فرضیاتی‬ moral theory according to these theories, the rightness or wrongness of
actions does not depend on their consequences but on whether they fulfill our duty. So According to
Kant a good person is someone who always does their duty because it is their duty. It is fine if they
enjoy doing it, but it must be the case that they would do it even if they did not enjoy it. The overall
theme is that to be a good person you must be good for goodness sake. Actions that are always good
are called “categorically” good. An action is morally right, if:
 It has a good motivation. A motivation is good if one performs the action only out of a sense of
duty, rather than for some gain that is expected for oneself.
 In addition to having a good motivation, an action must conform to two so-called “Categorical
imperatives” (=”unconditional commands”). First: Everyone should be able to do the same without
causing any logical problems. Second: Human beings must always be respected (treated as ends)
rather than used for the purposes of another (treated as means only).
If an action fails any of these three tests, it is morally wrong.
2.5- Moral Decision Making: A moral decision is a choice made based on a person's ethics,
manners, character and what they believe is proper behavior. These decisions tend to not only affect
your well-being, but also the well-being of others. People base moral decisions on a variety of
references including religious beliefs, personal values, and logical reasoning. From this reasoning
come two different types of morality: absolute morality and relative morality.
Absolute morality is a more rigid belief structure that is based on the idea that there is a right choice
for every moral dilemma, which holds true for all situations. People who believe in absolute morality
would believe this to be true in all situations, even in the case of war.
Relative morality recognizes that different situations may call for different actions that might not
always adhere to a person's original values. A person who has relative morality would stick with this
belief but might have a different opinion when it comes to war etc depending on the situation.


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
Unit 3: ECONOMIC JUSTICE AND CAPITALISM: Social justice embraces the ethos of
redistribution to achieve fairness and equality. Within that ethos, certain mores, assumptions, and
habits of mind have been so thoroughly imbued in students, professors, and public policy elites that
they have become second nature. Capitalism captures the motivation to self-interest and channels it
in a way that its doesn’t encourages human cooperation and betterment. Capitalism leads to a
significant loss of political, democratic and economic power for the vast majority of the global human
population. The reason for this is they believe capitalism creates very large concentrations of money
and property in the hands of a relatively small minority of the global human population the elite or
the "power elite", leading, they say, to very large and increasing, wealth and income inequalities
between the elite and the majority of the population.
3.1 Utilitarian View and Libertarian Approach:
In both Utilitarian view and Libertarian one is a political philosophy and the other is an ethical
theory. Utilitarianism broadly states that a moral action is one that maximizes happiness for the
greatest number of people. Libertarianism generally understood in the United States is a right-wing
political theory that broadly believes in a sort of J.Lockean minimal state where government doesn't
intervene in economic and civil life very much.
Utilitarianism is a theory in ethics that believes in the maximization of things for the benefit of the
whole society. It is a form of consequentialism. The goal is commonly referred to as happiness or
pleasure. It can be summed up to a general statement which states: “The promotion of the greater
good for the greatest number”. But, there is an ambiguity in the words “greater good”. It means
happiness or pleasure, not necessarily that it means the right thing or wrong thing. According to
Bentham, it only means “the tendency to augment or diminish happiness or pleasure”. When talking
about the number, one is equal to one vote; no one identity has a value of two.
Libertarianism is the belief in liberty. It is set of beliefs and ideas which advocates the maximization
of an individual’s thinking and living by abolishing or minimizing the power of the state. It believes
in a world that is free, peaceful and abundant. Also, they want to take control of their own lives
without taking into consideration other ideas. Each individual has his own opinions; each individual
may choose what to do with his life. Libertarians believe that each individual has his own life and that
he has a freedom to choose and live his life. Their goal is to bring liberty into the world. They believe
in the non-initiation of force.
Utilitarians may be libertarians, but there is nothing formally connecting one or the other. Whether or
not utilitarians should be libertarians depends upon whether or not libertarianism maximizes
happiness for the greatest number of people.
3.2 Rawls’s Theory of Justice: John Rawls (1921-2002) was a contemporary ‫عمر‬ ‫ہم‬ philosopher
who studied theories surrounding justice. His theories are not focused on helping individuals cope
with ethical dilemmas; rather they address general concepts that consider how the criminal justice
system ought to behave and function in a liberal democracy. Rawls argues that the primary concern
of justice is fairness, and within this paradigm Rawls identifies two principles:
1.“Each person is to have an equal right to the most extensive basic liberty compatible with a similar
liberty for others” Rawls goes further by allowing each person to engage in activities, as long as he or
she does not infringe on the rights of others.
2.“Social and economic inequalities are to be arranged so that they are both (a) reasonably expected
to be to everyone’s advantage (b) attached to positions and offices open to all” Likewise, everyone
should share in the wealth of society and everyone should receive benefits from the distribution of
wealth. Rawls does not argue that everyone should be paid the same, but rather that everyone should
have benefit from a fair income and have access to those jobs that pay more.

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3.3 Capitalism: Concepts and Arguments (Capitalism, Its Characteristics, with Pros and Cons):
Capitalism is an economic system where private entities own the factors of production. The four
factors are entrepreneurship, capital goods, natural resources, and labor. The owners of capital goods,
natural resources, and entrepreneurship exercise control through companies. The individual owns his
or her labor. The only exception is slavery, where someone else owns a person's labor. Although
illegal throughout the entire world, slavery is still widely practiced.
Characteristics of Capitalism: Capitalistic ownership means two things. First, the owners control the
factors of production. Second, they derive their income from their ownership. That gives them the
ability to operate their companies efficiently. It also provides them with the incentive
to maximize profit. This incentive is why many capitalists say "Greed is good." In corporations, the
shareholders are the owners. Their level of control depends on how many shares they own. The
shareholders elect a board of directors. They hire chief executives to manage the company.
Capitalism requires a free market economy to succeed. It distributes goods and services according to
the laws of supply and demand. The law of demand says that when demand increases for a particular
product, price rises. When competitors realize they can make a higher profit, they increase
production. The greater supply reduces prices to a level where only the best competitors remain.
The owners of supply compete against each other for the highest profit. They sell their goods at the
highest possible price while keeping their costs as low as possible. Competition keeps prices
moderate and production efficient. Another component of capitalism is the free operation of
the capital markets. That means the laws of supply and demand set fair prices for stocks,
bonds, derivatives, currency, and commodities. Capital markets allow companies to raise funds to
expand. Companies distribute profits among the owners. They include investors, stockholders,
and private owners.
Laissez-faire economic theory says the government should take a "hands-off" approach to capitalism.
It should intervene only to maintain a level playing field. The government role is to protect the free
market. It should prevent the unfair advantages obtained by monopolies or oligarchies. It ought to
prevent manipulation of information, making sure it is distributed equitably.
Part of protecting the market is keeping order with national defense. The government should also
maintain infrastructure. It taxes capital gains and income to pay for these goals. Global governmental
bodies adjudicate international trade.
Advantages of Capitalism: Capitalism results in the best products for the best prices. That's because
consumers will pay more for what they want the most. Businesses provide what customers want at the
highest prices they’ll pay. Prices are kept low by competition among businesses. They make their
products as efficient as possible to maximize profit.
Most important for economic growth is capitalism's intrinsic reward for innovation. This includes
innovation in more efficient production methods. It also means the innovation of new products. As
Steve Jobs said, "You can't just ask customers what they want and then try to give that to them. By
the time you get it built, they'll want something new."
Disadvantages of Capitalism: Capitalism doesn't provide for those who lack competitive skills. This
includes the elderly, children, the developmentally disabled, and caretakers. To keep society
functioning, capitalism requires government policies that value the family unit.
Despite the idea of a “level playing field,” capitalism does not promote equality of opportunity. Those
without the proper nutrition, support, and education may never make it to the playing field. Society
will never benefit from their valuable skills.

Page | 18
 In the short term, inequality may seem to be in the best interest of capitalism's winners. They
have fewer competitive threats. They may also use their power to "rig the system" by creating
barriers to entry. For example, they will donate to elected officials who sponsor laws that benefit
their industry. They could send their children to private schools while supporting lower taxes for
public schools.
 In the long term, inequality will limit diversity and the innovation it creates. For example, a
diverse business team is more able to identify market niches. It can understand the needs of
society's minorities, and target products to meet those needs.
 Capitalism ignores external costs, such as pollutionand climate change. This makes goods
cheaper and more accessible in the short run. But over time, it depletes natural resources,
lowers the quality of life in the affected areas, and increases costs for everyone. The government
should impose Pigouvian taxes to monetize these external costs and improve the general welfare.
 Some critics say these problems are signs of late-stage capitalism. They argue that capitalism's
flaws mean it has evolved past its usefulness to society. They don't realize that capitalism's flaws
are endemic to the system, regardless of the phase it is in.
 America's Founding Fathers included promotion of the general welfare in the Constitution to
balance these flaws. It instructed the government to protect the rights of all to pursue their idea of
happiness as outlined in the American Dream. It's the government's role to create a level playing
field to allow that to happen.
Capitalism vs. Socialism /Communism: Proponents of socialism say their system evolves
from capitalism. It improves upon it by providing a direct route between citizens and the goods and
services they want. The people as a whole own the factors of production instead of individual
business owners.
Many socialistic governments own oil, gas, and other energy-related companies. It’s strategic for a
government to control these profitable industries. The government collects the profit instead of
corporate taxes on a private oil company. It distributes these profits in government spending
programs. These state-owned companies still compete with private ones in the global economy. Most
societies in the modern world have elements of all three systems. This blend of systems is called
a mixed economy. Elements of capitalism also occur in some traditional and command economies.
Capitalism versus Fascism: Capitalism and fascism both allow private ownership of businesses.
Capitalism gives those owners free rein to produce goods and services demanded by consumers.
Fascism follows nationalism, requiring business owners to put national interests first.
Companies must follow the orders of the central planners.
Capitalism and Democracy: Monetarist economist Milton Friedman suggested that democracy can
only exist in a capitalistic society. But many countries have socialist economic components and a
democratically-elected government. Others are communist but have thriving economies thanks to
capitalistic elements. Examples include China and Vietnam. Some others are capitalist and governed
by monarchs, oligarchs, or despots.
The United States is mostly capitalistic. The federal government does not own corporations. One
important reason is that the U.S. Constitution protects the free market. For example:
Article I, Section 8 establishes the protection of innovation through copyright.
Article I, Sections 9 and 10 protects free enterprise and freedom of choice. It prohibits states from
taxing each other's production.
Amendment IV prohibits unreasonable government searches and seizures, thereby protecting
private property.

Page | 19
Amendment V protects the ownership of private property.
Amendment XIV prohibits the government from taking property without due process of law.
Amendments IX and X limit the government's power to those outlined explicitly in the
Constitution. All other powers not mentioned are conferred to the people.
The Preamble of the Constitution sets forth a goal to "promote the general welfare." It requires the
government to take a more significant role than that prescribed by a pure market economy. That's
why America has many social safety programs, such as Social Security, food stamps, and Medicare.
Examples of Capitalism: The United States is one example of capitalism, but it's not the best. In fact,
it doesn't even rank within the top 10 countries with the freest markets. That's according to
both Global Finance Magazine and The Heritage Foundation, a conservative think tank. They based
their ranking on nine variables. These include a lack of corruption, low debt levels, and protection of
property rights.
The top 10 most capitalistic countries are:
1. Hong Kong
2. Singapore
3. New Zealand
4. Switzerland
5. Australia
6. Ireland
7. Estonia
8. United Kingdom
9. Canada
10. United Arab Emirates
The United States ranks 18th. Its weak spots are in business freedom and property rights. Its immense
national debt also limits fiscal policy. It's created a future tax burden that will restrict taxpayer
freedom.
Difference between Capitalism, Socialism, Communism, and Fascism:
Attribute Socialism Capitalism Communism Fascism
Factors of production are
owned by
Everyone Individuals Everyone Individuals
Factors of production are
valued for
Usefulness to
people
Profit Usefulness to
people
Nation building
Allocation decided by Central plan Law of demand and
supply
Central plan Central plan
From each according to his Ability Market decides Ability Value to the nation
To each according to his Contribution Wealth Need Value to the nation
3.4 Criticisms of Capitalism: Ideologies are a set of ideas, ways, thoughts, goals, expectations and
actions that are shared within a community. It is made by a society that believes in the same goals,
expectations, etc. Its purpose is to offer change in a society where the group belongs. It is a set of
views that guides its members on how to see things. Literally, it means the science of ideas.
Moreover, it is a set of ideas that characterize a certain group.
 It Encourages inequality in a society. Capitalism allows some people to get rich but also
allows others to become poor.
 Capitalism allows products to be produced even if they are not in the public good. For
example, it allows cars that get very low gas mileage to be produced even though they help
cause global warming.
 Capitalism allows industries to pollute the environment. In pure capitalism, a government
would not be able to prevent companies from, for example, dumping toxic waste in a river.
 Pure capitalism allows people to lack basic needs such as health care.
 Unregulated capitalism allows for things like the Great Depression and the financial crisis of
last year because it doesn't prevent businesses from acting in destructive ways.

Page | 20
Capitalism: Capitalism is an economic system in which capital goods are owned by private
individuals or businesses. All economic resources are owned by the people. They decide
how and where to channelize those resources. The market forces of demand and supply
determine the equilibrium market price, which in turn determines profits. The political
counterpart of this system is called “Democracy." Market economy believes in Laissez-
faire meaning non-intervention by the government in the functioning of the economy.
Socialism/ Communism: A political and economic theory of social organization which
advocates that the means of production, distribution, and exchange should be owned or
regulated by the society/ community as a whole. Communism includes a variety of schools
of thought, which broadly include Marxism, Anarchism (anarcho-communism) and
Leninism, Stalinism and Trotskyism as well as the political ideologies grouped around all.
Fascism:‫فاشزم‬ - ‫فسطائیت‬ : Most definitions agree that fascism is authoritarian and promotes
nationalism at all costs, but its basic characteristics are a matter of debate. Fascism is a
complex ideology Fascism is commonly associated with German Nazi and Italian regimes
that came to power after World War I, though several other countries have experienced
fascist regimes or elements of them. Adolf Hitler in Germany, Benito Mussolini in Italy,
Francisco Franco in Spain and Juan Perón in Argentina were well-known fascist leaders of
the 20th century.
Monarchy: ‫:شہنشاہیت‬ Monarchy, political system based upon the undivided sovereignty or
rule of a single person. The term applies to states in which supreme authority is vested in
the monarch, an individual ruler who functions as the head of state and who achieves his or
her position through heredity. Most monarchies allow only male succession, usually from
father to son.
Dictatorship: A dictatorship is a government or a social situation where one person makes
all the rules and decisions without input from anyone else. Dictatorship implies absolute
power one person who takes control of a political situation, a family, a classroom or even a
camping expedition.
3.5- Research Ethics: Research that involves human subjects or participants raises unique and
complex ethical, legal, social and political issues. Research ethics is specifically interested in the
analysis of ethical issues that are raised when people are involved as participants in research.
Ethics in business research refers to a code of conduct or expected societal norm of behavior while
conducting research. Ethical conduct applies to the organization and the members that sponsor the
research, the researchers who undertake the research, and the respondents who provide them with the
necessary data. The observance of ethics begins with the person instituting the research, who should
do so in good faith, pay attention to what the results indicate, and surrendering the ego, pursue
organizational rather than self-interests. Ethical conduct should also be reflected in the behavior of
the researchers who conduct the investigation, the participants who provide the data, the analysts who
provide the results, and the entire research team that presents the interpretation of the results and
suggests alternative solutions. There are three objectives in research ethics.
 The first and broadest objective is to protect human participants.
 The second objective is to ensure that research is conducted in a way that serves interests of
individuals, groups and/or society as a whole.
 Finally, the third objective is to examine specific research activities and projects for their ethical
soundness, looking at issues such as the management of risk, protection of confidentiality and the
process of informed consent.


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
Unit 4: ETHICS IN CORPORATIONS: The primary objective of a corporation is to increase
shareholder value. Successful corporations must operate within society; to that end, they must
maintain the values and norms of the society in which they operate. Businesses are expected to fully
comply with environmental laws, federal and state safety regulations, fiscal and monetary reporting
statutes and all applicable civil rights laws. A new theory in social responsibility is sustainability.
Sustainability is the concept that companies that are socially responsible will outperform their peers
or competitors by concentrating on society’s problems, seeing them as opportunities for profit
building and aiding the world at the same time
4.1- Corporate Moral Agency: A moral agent is anyone capable of making ethical decisions and
putting them into action. The idea that an organization has moral agency stems in part from U.S.
Supreme Court decisions declaring that a corporation is a person in the eyes of the law. That makes
an organization accountable for the predictable results of its actions. In practical terms, this means
your small business has a responsibility to the public to act ethically.
I. Power to Act: The source of an organization's moral agency is its collective power to act, because
small business has power, it also has the responsibility to make ethical decisions.
II. Effects: All of business's decisions, whether ethical or not will have an affect starting with
employees, customers and extending to the larger community.
III. Viability ‫حیات‬ ‫قابلیت‬: An organization's actions can affect its viability within its industry; a
company that supports environmentally friendly suppliers might not last long if its competitors
choose low-cost suppliers to undercut its prices.
IV. Responsibility: All members of an organization are responsible for the effects of its initiatives.
But top-level managers often have access to information that low-level employees do not, so they
bear a larger portion of responsibility for the organization's decisions.
V. Legality: Government regulations control the behavior of businesses and protect the public from
unethical practices to some degree. Adhering to these regulations limits your legal liability, but
morality is more than self-protection.
VI. Corruption: Companies making payments to secure business that they would not otherwise
obtain are guilty of illegal actions under the U.S. Foreign Corrupt Practices Act. The payments,
even if they seem to be customary, are usually illegal under local laws as well as in global
perspective. When a company makes such payments, it is encouraging a local system of
corruption through unethical behavior.
VII. Human Rights: The country into which you are expanding may not respect basic human rights.
The ethical issue facing your company is whether your presence supports the current abusive
regime or whether your presence can serve as a catalyst for human rights improvements.
VIII. Pollution: Not all foreign countries have environmental legislation that makes it illegal to pollute.
Companies may discharge harmful materials into the environment and avoid costly anti-pollution
measures. An ethical approach to expansion into such markets is to limit environmental footprint
beyond what is required by local laws. An ethically operating company ensures its operations
don't have harmful effects on the surrounding population.
4.2- Rival Views of Corporate Responsibility: Given the recent global financial crisis (GFC) and the
numerous business scandals worldwide involving accountants and business executives provides a
justification to open up the debate of “what are the social responsibilities of a business particularly
corporations?”

Page | 22
Friedman’s view, Stakeholder, Legitimacy and Deontological theory, Utilitarianism and Virtues are
discussed with the aim to explore the social responsibilities of a corporation. This study found that
Corporations may have more than just the responsibility to increase profits for its shareholders, and
must consider the environment and community at large but that all depends on the ethical view that
one takes to explain their ethical decision making. Additionally, this review found that traditional
accounting may need to be reformed to include more social and environmental accounting
information and thus making corporations more accountable to the community. Social and
environmental accounting may be essential and to be made mandatory if corporations are to satisfy
the accountability relationships with stakeholders and if it is to change the consciousness of
corporations.
4.3- Debating Corporate Responsibility: In recent years, CSR or Corporate Social Responsibility
has become the latest buzzword among the companies. This refers to the practice of the corporate in
“giving back” to society in the form of programs that benefit the less privileged members of society.
They can take the form of outreach programs that adopt schools; communities etc and provide funds
for their upkeep as well as promote socially conscious business practices that lead to the betterment
of society.
If we examine both sides of the debate as well as take into account superficial attempts by businesses
to pay lip service to CSR, the first strand of thought that comes to mind is about the need for
businesses to invest in CSR as a way of mitigating the deleterious effects of the industrial paradigm
on the environment. The practice of CSR by industrial companies is in vogue these days because of
the fact that they have contributed to polluting the environment. As Martha Nussbaum contends, “If
this world is to be a decent world in the future, “we must acknowledge right now that we are citizens
of one interdependent world, held together by mutual fellowship as well as the pursuit of mutual
advantage, by compassion as well as self-interest, by a love of human dignity in all people, even
when there is nothing we have to gain from cooperating with them”
Hence, in this interconnected and flat world there is a need for concerted action by the businesses to
take steps that would alleviate the pressing issues of the day. However, the opponents of this view are
some of the multinationals themselves as can be seen from the following excerpt, “Thus the central
theoretical and practical question in the discussion of corporate social responsibility is whether it
remains a voluntary choice of the business or should be ensured through formal control”.
The point here is that CSR is being enforced rather than voluntarily embraced. This fact alone makes
it clear that businesses by themselves do not contribute to CSR and that they have to be regulated to
do so.
4.4- Institutionalizing Ethics within Corporations: The institutionalization of ethics is an
important task for today's organizations if they are to effectively counteract the increasingly frequent
occurrences of blatantly unethical and often illegal behavior within large and often highly respected
organizations. Ethical business practices do more than create a good name for a company. They tell
employees, suppliers, investors and shareholders they are associating with a trustworthy company
that will protect their interests and make decisions not based solely on profit.
Corporate Policies: Most people learn the difference between right and wrong at an early age. But
sometimes the difference between right and wrong in a business setting isn’t black and white. A
company should establish guidelines for ethical behavior and identify the proper course of action in
situations that might have several possible outcomes.
Ethics Training: Establish annual ethics training for employees to ensure they understand the
corporate ethics policies and know how to respond if presented with a situation that might
compromise the company. Scenario-based training involving employees, suppliers, management and

Page | 23
others in hypothetical situations is an excellent way to learn how to respond ethically to situations
where there are several possible outcomes.
Ombudsman ‫محتس‬‫ب‬ Even with clearly defined ethics policies, employees may face situations
involving unethical behavior but don’t want to get a co-worker or supervisor in trouble or an
employee might be afraid that reporting unethical behavior could jeopardize his job. Corporations can
reinforce ethics policies and encourage employees to abide by ethical standards by providing an
ombudsman to discuss sensitive situations with them, advise them on the proper course of action and
protect them from retaliation.
Industry Recognition: Look for opportunities for recognition among industry peers as an ethical
business. Ethisphere, which recognizes the “World’s Most Ethical Companies” each year, uses a
rating system to capture a company’s ethical performance.
4.5- Social Accountability SA8000: SA 8000 is an international certification standard that
encourages organizations to develop, maintain and apply socially acceptable practices in the
workplace. Since its creation in 1989, the Social Accountability International (SAI) organization, an
affiliate of the Council on Economic Priorities, is viewed as the most globally accepted independent
workplace standard. The SA 8000 standard can be applied to any company, of any size, worldwide.
SA 8000 certification addresses issues including forced and child labor, occupational health and
safety, freedom of association and collective bargaining, discrimination, disciplinary practices,
working hours, compensation, and management systems.
Elements of the SA8000:
1. Child Labor
2. Forced or Compulsory Labor
3. Health and Safety
4. Freedom of Association
5. Right to Collective Bargaining
6. Discrimination
7. Disciplinary Practices
8. Working Hours
9. Remuneration
10. Management System
Benefits of SA 8000 Certification Standard:
 Proves your commitment to social accountability and to treating your employees ethically and
in compliance with global standards.
 Improves the management and performance of your supply chain.
 Allows you to ensure compliance with global standards and reduce the risk of negligence,
public exposure and possible litigation.
 Supports your corporate vision and build and reinforce the loyalty of your employees,
customers and stakeholders.
 Enables you to demonstrate proper social accountability when bidding for international
contracts or expanding locally to accommodate new business.
Conclusion: The field of business ethics is an expanding field. There are many
corporations who have worked diligently to integrate ethical analysis into defining their
corporate culture with an aim to social responsibility and return. There is a legal
framework to guide these decisions, but the law and ethics are not one and the same. The
law represents the bare minimum as an ethical framework. As a consumer, it is important
to distinguish between mandates and choices that for-profit organizations value.
‘--
The earth provides enough resources for everyone’s need, but not for some people’s greed’ “Ghandi”


Page | 24

Unit 5: ETHICS FOR CONSUMERS: Being an ethical consumer in today’s world requires first
recognizing that consumption is not just embedded in economic relations, but also social and political
ones. Because of this, what we consume matters beyond the immediate context of our lives.
In order to encourage sales, business managers pay close attention to consumer opinion polls,
feedback, and attitudes. This has evolved into basic understandings of consumer rights and
protections that have been developed through the years in order to encourage a positive relationship
between business management and consumer demand.
5.1- Product Safety: Consumers play an important role in bridging the gap between business and
society. Product safety is a term used to describe policies designed to protect people from risks
associated with thousands of consumer products they buy and use every day. The consumer is
literally a pulse by which a business advertises and markets a product. Injuries and other problems
from consumer products cost the U.S. over $900 billion each year. That figure would be even higher
without efforts to promote product safety. There are a number of laws at the state and federal levels
intended to protect buyers from unsafe consumer goods or potentially harmful elements found in
many common products. Perhaps the most important of these laws is the federal Consumer Product
Safety Act (CPSA). The law was enacted by Congress in 1972. It established an independent
regulatory agency of the federal government known as the Consumer Product Safety Commission.
Federal law authorizes the Commission to develop safety standards, enforce compliance, and to ban
unsafe products under certain circumstances. The Commission investigates complaints from
consumers concerning unsafe products, products that may be defective or products that violate
product safety standards. Product safety standards are rules that relate to the design and manufacture
of consumer goods to protect users from an unreasonable risk of harm.
5.2- Other Areas of Business Responsibility: Responsibility is the one word that may convey
the reason for the development of ethical standards or behaviors. Ethical issues surround nearly every
aspect of the goal of any business: to increase stocks, backing, reputation, and most importantly,
profit. While the pricing of products is an important part of sales and product placement, advertising
and marketing are issues that involve a large degree of business ethics. Financial or corporate
responsibility engenders respect and encourages individuals to invest in communities and charitable
organizations.
5.3- Deception and Unfairness in Advertising: Consumers expect honest and fair advertising,
marketing and advertising plays a huge part in the popularity of a particular product. Consumers who
are harmed by deception and purchase a product that they normally wouldn't have, based upon false
advertising claims, may feel they have been manipulated by retailers and suppliers. Competitors may
also lose out because of such practices. Therefore, anything that is unfair to consumers is unfair to
competitors. Deception ‫بازی,دھوکا‬ ‫دغا‬ and coercion ‫جبر‬ are prime examples of unethical behavior
when it comes to consumer rights and expectations. Whether the advertisement is for luxuries
products or a life alert bracelet, consumers must by necessity continue to demand transparency and
fair practices to protect their consumer rights. Following are some aspects of Deception and
Unfairness in Advertising etc.
I. False Labeling: False and misleading labeling is that if the labeling is deceptive ‫دہ‬ ‫,فریب‬ untrue or
leaves out important safety information, the product may be misbranded. Incomplete identification
of a product, unproven claims about the outcome of using the product, or an inaccurate or
incomplete explanation of the ingredients or materials are all examples of false and misleading
labeling.
II. Healthy Exaggerations ‫آرائی‬ ‫بالغہ‬‫م‬ (ex·ag·ger·a·tion): Exaggeration is a statement that represents
something as better or worse than it really is. Embellishment is part of human nature, experts say,

Page | 25
and almost everyone is guilty of it at one time or another. It immoral for a company to exaggerate
or even “stretch the truth” in their advertising.
III. High-Tech Hijinx( also hi-jinks, high jinks, "boisterous capers, lively or boisterous sport," 1842,
from name of games played at drinking parties): Tech companies have been known to bury the
reality of their products under layers of impressive vocabulary and general misrepresentation.
IV. Financial Fraudsters: Businesses of all sizes have the responsibility to publish accurate financial
statements, which are a vital form of advertising the business to potential shareholders.
5.4- Debate over Advertising: Laws and regulations to protect consumers from being cheated
provide strong incentives against such behavior of exploitation of needs and wants of consumers.
However, advertising does contribute to the economy by providing information to consumer’s real
needs and additional wants. While many people benefit from positive marketing and advertisements
for various products or services, they also expect honesty and truth. Majority of advertising
executives are careful to avoid overt exploitation and manipulation of consumers in general, but
unfortunately it still happens in competitive markets around the global economy. Those who are
vulnerable are especially susceptible to such marketing practices. It is important for many marketing
and advertising executives to attempt to determine a target group in order to successfully launch an
advertising campaign, the ethics involved in approaching the topic and designing an ad campaign that
does not play on fears, but offers reliable information are often blurred. While marketing and
advertising executives deal with the attitudes of the general population, sales people deal with
individual customers. Customers dealing with a sales representative on a one-on-one basis seem to be
more alert and wary to coercion, pressure, or encouragement to buy a particular service or product.
However, when it comes to magazine and television ads, consumers seem to be less aware of
manipulation. Avoiding criminal liability and encouraging trust are behind many of the new laws and
regulations created among financial institutions to rebuild consumer confidence lost because of
insider trading, leveraged buyouts, and junk bonds. Unethical behavior and activities that have done
nothing but smear the reputation of investment firms, banking institutions, and Wall Street brokers
for many years is finally being addressed by major financial giants.
5.5- Corporate Governance: Corporate governance is the system of rules, practices and processes
by which a firm is directed and controlled. Corporate governance essentially involves balancing the
interests of a company's many stakeholders, such as shareholders, management, customers, suppliers,
financiers, government and the community. Since corporate governance also provides the framework
for attaining a company's objectives, it encompasses practically every sphere of management, from
action plans and internal controls to performance measurement and corporate disclosure.
Communicating a firm's corporate governance is a key component of community and investor
relations. On Apple's investor relations site, for example, the firm outlines its leadership and
governance, including its executive team, its board of directors and also the firm's committee charters
and governance documents, such as bylaws, stock ownership guidelines and Apple's articles of
incorporation.
Corporate responsibility, especially in the financial industry, carries an obligation to not only its
stockholders, but to everyone within the organization. Doing so helps to strengthen a corporation's
accountability and encourages responsible business practices. Today, corporate criminal liability
costs may reach into the billions of dollars in fines and sanctions. Not only does a financial institution
face astronomical fines, but stock prices also drop and financial performance decreases as a result of
unethical business practices. Since the 1980s, fines, not only against individuals, but entire
organizations, have increased. White-collar crime has been addressed by the creation in the early
1980s of the United States Sentencing Commission, and covers unethical behavior such as antitrust,
fraud, securities, and tax loopholes.

Page | 26
Ethics and the Law: The relationship between ethics and the law is something we will always have to
bear in mind from a theoretical as well as a practical point of view. The philosophy of law,
jurisprudence, is a large area of study with a considerable overlap with applied ethics, but which also
addresses a number of issues we cannot deal with here. Both ethics including business ethics and the
legal system in a given country evolve over time. If we see the law as the penalization of a moral
code then we may note the following:
 There are actions which are legal but may be considered unethical by some individuals in a
society.
 There are actions which may be illegal but have no specific ethical content (except, of course,
that one should obey the law!). Typically this may include minor infringements of laws which are
intended as administrational or where arbitrary limits have been set. This is not to say that such laws
can be broken but that extensive ethical analysis may not be useful.
 Some non-deontological approaches to ethics relate to character development or to maximizing
social benefit which are simply not addressed by the law, except as they relate to resulting actions. It
is not illegal to wish someone harm unless you do or perhaps say something about it, though this
does not show a high level of moral development! Similarly, it is hard to see how a law could the
utilitarian objective of maximizing happiness!
Another key issue in political and social debate is the freedom of individuals in a society. An
underpinning assumption in a market economy is that consumers have freedom of choice, if only for
the practical reason that this is how a market works.
Conclusion: From all of above it’s concluded that corporate government regulations help
to protect reputation ‫شہرت‬ ‫۔‬ ‫ساکھ‬, fair and accurate audits and accounting just a few of the
aspects that involve financial business ethics. Trust in every aspect of business is vital for
success, but within the financial industry, it is absolutely essential. Ethical and social
responsibility from financial and public institutions from the community bank to the
stockbroker on Wall Street are expected and demanded by consumers. Tolerance for
unethical behavior is extremely low and the demand for greater sanctions, fines, and jail
terms for those who even consider unethical behavior within this field are growing.
--
Lecture: Curse of the Consumer Society by Abdur Raheem Green


Page | 27

Unit 6: THE ENVIRONMENT: The combination of internal and external factors that influence a
company's operating situation. The business environment can include factors such as: clients and
suppliers; its competition and owners; improvements in technology; laws and government activities;
and market, social and economic trends. Environmental ethics is formally defined as the study of
human interaction with nature. In a business sense, environmental ethics is concerned with a
company's responsibility to protect the environment in which it operates.
6.1 Business and Ecology: Business is socially responsible to the environment because it is an
important part of the macro-ecological system. Business is part of the society and at the same time
part of Mother Nature, such that any separation made between business and nature is artificial and
false. Business depends on the natural environment for its operation, e.g., energy, raw materials and
waste disposal. It is socially irresponsible for business to destroy the very resources that they depend
on. Business, no doubt, has contributed greatly to the destruction of the earth and out environment.
The creation of new products and services to satisfy the need and wants of the customers, for
instance, do not come without any price to pay. e.g. The depletion of natural resources to produce
something. Although business has, in one way or the other, helped in the promotion of the quality of
life of people, it has, on the other hand, contributed to the destruction of the earth and the pollution of
our environment. The Moral and Social Obligations of Business to the Environment:
1. Protection of the Biosphere
2. Sustainable Use of Natural Resources
3. Reduction and Disposal of Waste
4. Wise Use of Energy
5. Risk Reduction
6. Marketing of Safe Products and Services
7. Damage Compensation
8. Disclosure
9. Environmental Directors and Managers
10. Assessment and Annual Audit
6.2 The Ethics of Environmental Protection: Environmental ethics is the part of environmental
philosophy which considers extending the traditional boundaries of ethics from solely including
humans to including the non-human world. It exerts influence on a large range of disciplines
including environmental law, environmental sociology, ecotheology, ecological economics,
ecology and environmental geography.
The field of environmental ethics concerns human beings’ ethical relationship with the natural
environment. While numerous philosophers have written on this topic throughout
history, environmental ethics only developed into a specific philosophical discipline in the
1970s.Things like water and air pollution, the depletion of natural resources, loss of biodiversity,
destruction of ecosystems, and global climate change are all part of the environmental ethics debate.
Environmental ethics, along with human values, make for challenging philosophical debates about
man's interaction with the environment. Water and air pollution, the depletion of natural resources,
loss of biodiversity, destruction of ecosystems, and global climate change are all part of the
environmental ethics debate.
6.3 Delving Deeper into Environmental Ethics: To satisfy its disproportionate consumption of
nonrenewable resources, America turns to foreign lands.
This raises two critical moral questions: How is the continued availability of foreign resources to be
secured? Does any nation have a right to consume the world’s irreplaceable resources at a rate so
grossly out of proportion to the size of its population?
Obligations to future generations: A broader view of environmental ethics considers our duties to
other societies and upcoming generations. Some say we must respect the right of future generations
to inherit an environment that is not seriously damaged. Others argue that by putting ourselves in the
“original position,” we can balance our interests against those of our descendants.

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