business ethics midterm

7/26/2019 Business Ethics Midterm

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Ch- 2Corporate Governanc

Theories and Models


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1. Agency Theory

Agency theory suggests that the frm can be viewed as a nexus o contracts defned! between resource holders" An agency relationship arises whenever individuals# called principals# hire one or more other individuals# called agenperorm some service and then delegate decision-ma$ing authority to the ag

The separation of ownership and control

These relationships are not necessarily harmonious; indeed, agencyconcerned with so-called agency conicts, or conicts of interest be

agents and principals


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CO!"#CT$ %&T'&& (AA)&*$ A+$A*&O"+&*$

$elf-interested behaiour

A corporation%s managers may have personal goals that compete with thgoal o maximi&ation o shareholder wealth" 'ince the shareholders authmanagers to administer the frm%s assets# a potential con(ict o interest between the two groups"

Agents have the ability to operate in their own sel-interest rather than iinterests o the frm because o asymmetric inormation e"g"# managersbetter than shareholders whether they are capable o meeting the share

ob)ectives! and uncertainty e"g"# myriad actors contribute to fnal outcomay not be evident whether the agent directly caused a given outcome#negative!"

*vidence o sel-interested managerial behavior includes the consumptiocorporate resources in the orm o per+uisites and the avoidance o optipositions# whereby ris$-averse managers bypass proftable opportunitiesthe frm%s shareholders would preer they invest"


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,n the ma)ority o large publicly traded corporations# agency con(icpotentially +uite signifcant because the frm%s managers generally small percentage o the common stoc$" Thereore# shareholder weamaximi&ation could be subordinated to an assortment o other mangoals" or instance# managers may have a undamental ob)ective omaximi&ing the si&e o the frm" .y creating a large# rapidly growingexecutives increase their own status# create more opportunities ormiddle-level managers and salaries# and enhance their )ob security

an unriendly ta$eover is less li$ely" As a result# incumbent managepursue diversifcation at the expense o the shareholders who can ediversiy their individual portolios simply by buying shares in othercompanies"


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Costs of share-holdersmanagement conict

/hen agency occurs it also tends to give rise to agency costs# which are expenorder to sustain an e0ective agency relationship"

Agency costs - Agency costs are defned as those costs borne by shareholdersmanagers to maximi&e shareholder wealth rather than behave in their own sel

There are three maor types of agency costs/

expenditures to monitor managerial activities# such as audit costs1

expenditures to structure the organi&ation in a way that will limit undesirable managsuch as appointing outside members to the board o directors or restructuring the counits and management hierarchy1

pportunity costs which are incurred when shareholder-imposed restrictions# such as

shareholder votes on specifc issues# limit the ability o managers to ta$e actions thashareholder wealth"

,n the absence o e0orts by shareholders to alter managerial behavior# thtypically be some loss o shareholder wealth due to inappropriate managn the other hand# agency costs would be excessive i shareholders atteensure that every managerial action conormed with shareholder interesthe optimal amount o agency costs to be borne by shareholders is detercost-beneft context3agency costs should be increased as long as each

dollar spent results in at least a dollar increase in shareholder wealth"


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(echanism for dealing withAgency conict/

At one extreme# the frm%s managers are compensated entirely on the bprice changes" ,n this case# agency costs will be low because managers incentives to maximi&e shareholder wealth" ,t would be extremely di4cuto hire talented managers under these contractual terms because the fearnings would be a0ected by economic events that are not under mancontrol" At the other extreme# stoc$holders could monitor every managebut this would be extremely costly and ine4cient" The optimal solution the extremes# where executive compensation is tied to perormance# bumonitoring is also underta$en"

An e0ectively structured board Compensation contracts that encourage a shareholder orientation 5erorma

incentive plans!

Concentrated ownership or Close monitoring 6 7irect intervention by share

The threat o fring

Agency theory thus adocates the managers hae their self-inteshould be controlled 0 closely monitored to aoid agency loss


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. The $tewardship Theo

'tewardship theory defnes situations in which managers are not moindividual goals# but rather are stewards whose motives are aligned wob)ectives o their principals"

Given a choice between sel-serving behaviour and pro- organi&ationbehaviour# a steward8s behaviour will not depart rom the interest o organi&ations"

.ecause the steward perceives greater utility in cooperative behaviobehaves accordingly# his or her behaviour can be considered rational

A steward protects 6 maximi&es shareholders wealth through frm8sperormance# because by doing so# the stewards utility unction is ma


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The steward realises the trade-o0 between his personal 6 organi&ationabelevies that by wor$ing towards organi&ational 6 collective ends# theseneeds are met" Managers are viewed as loyal to the company and intereachieving high perormance" The dominant motive# which directs managaccomplish their )ob# is their desire to perorm excellently" 'pecifcally# mconceived as being motivated by a need to achieve# to gain intrinsic satthrough successully perorming inherently challenging wor$# to exerciseand authority# and thereby to gain recognition rom peers and bosses" Tare non-fnancial motivators or managers"

, the executive8s motivations ft the model o man underlying stewardshempowering governance structures are appropriate" :;e or she can be tcase the so called :agency costs< are diminished

'o# why isn8t there always a steward relationship# rather than an agency

The answer lies in the ris$s that principals are willing to assume" /ithin governance contract# owners must decide how much ris$ they are willinwith their wealth" ,mplementing stewardship governance mechanisms o

would be analogous to turning the hen house over to the ox


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Agency 2s stewardship theo


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3rincipal- (anager choice m


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4.$ta5eholders theory

7efnition o 'ta$eholders > those o group without whose support the orgwill cease to exist"

'ta$eholder theory stresses that the frm is a system o sta$eholders opea larger system o the host society that provides the necessary legal 6 minrastructure or the frm8s activities

The purpose o the frm is to create wealth or value or its sta$eholders

Corporations should not be regarded as bundle o assets that belong to sbut rather as institutional arrangements or governing the relationships bo the parties that contribute frm-specifc assets" This includes not onlyshareholders# but also long-term employees who develop speciali&ed s$ilthe corporation 6 suppliers# customers 6 others who ma$e speciali&ed in

This approach to corporate governance strongly suggests that corporatioby loosely defned groups o people# each see$ing something di0erent roorgani&ation


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'ta$eholders have di0erent goals and see$ di0erent benefts rom the frm" /or$

security# the government wants its tax payments# investors want dividends# and community wants a solid economic base" The sta$eholder theory holds that theseinterests do# in act# control the frm in their own specifc ways# and none has anyto have its voice heard than any other"

,t mandates that a well organi&ed frm will ta$e all sta$eholder groups into accouormulating basic policies"

'ta$eholder theory is a highly democratic and participatory concept o corporate

?nder this model# the frm is not merely a proft-ma$ing machine or elite investo

executives" Thousands o lives are potentially connected to and dependent upon wor$ings o the frm"

5roblems @ The groups mentioned as possible or actual sta$eholders are so variedthat it is practically impossible that they spea$ with a common voice# let alone acin an oversight capacity" The sta$eholder theory might be successul in identiyinhave a vested interest in the frm# but whether these sta$eholders can actually ruvery di0erent matter"


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.e 6 cgTopic > Cadbury committee report


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Cadbury committee report on c

The %Cadbury Committee% was set up in May BB with a view to overchuge problems o scams and ailures occurring in the corporate sectoin the late BDEs and the early BEs"

,t was ormed by the inancial Feporting Council# the ondon 'toc$ o

and the accountancy proession# with the main aim o addressing the aspects o Corporate Governance"

b)ectives@

uplit the low level o confdence both in fnancial reporting and in the ability oprovide the saeguards which the users o company%s reports sought and expe

review the structure# rights and roles o board o directors# shareholders and ama$ing them more e0ective and accountable1

address various aspects o accountancy proession and ma$e appropriaterecommendations# wherever necessary1

raise the standard o corporate governance1


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Cadbury committee report

The report was mainly divided into three parts@- Feviewing the structure and responsibilities o .

o 7irectors and recommending a Code o .est

Considering the role o Auditors and addressingnumber o recommendations to the Accountanc

5roession

7ealing with the Fights and Fesponsibilities o'hareholders


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i" Code o .est 5ractice

The boards o all listed companies should compthe Code o .est 5ractice"

All listed companies should ma$e a statement atheir compliance with the Code in their report aaccounts as well as give reasons or any areas o

compliance" The Code o .est 5ractice is segregated into ou

sections@ %oard of +irectors

on-&6ecutie +irectors

&6ecutie +irectors


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B" .oard o 7irectors

The board should meet regularly# retain ull and e0ective contrcompany and monitor the executive management"

There should be a clearly accepted division o responsibilities ao a company# which will ensure a balance o power and authorthat no one individual has unettered powers o decision"

,deally the role o chairman 6 chie executive should be separait is essential that there should be a strong and independent elthe board# with a recogni&ed senior member"

.esides# all directors should have access to the advice and servthe company secretary# who is responsible to the .oard or ensboard procedures are ollowed and that applicable rules and reare complied with"


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. on-&6ecutie +irectors

The non-executive directors should bring anindependent )udgment to bear on issues o straperormance# resources# including $ey appointmand standards o conduct"

The ma)ority o non-executive directors should b

independent o management and ree rom anybusiness or other relationship which could mateinterere with the exercise o their independent)udgment# apart rom their ees and shareholdin

Hon-executive directors should be appointed by

ormal process" Appointments should be or spe


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I" *xecutive 7irectors

7irectors service contract should not exceed I ywithout shareholders approval

There should be ull and clear disclosure o diretotal emoluments and those o the chairman anhighest-paid directors# including pension contrib

and stoc$ options# in the company%s annual repoincluding separate fgures or salary and perormrelated pay"


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7. !inancial *eportingand Controls

,t is the duty o the board to present a balancedunderstandable assessment o their company8sposition# in reporting o fnancial statements# oproviding true and air picture o fnancial repor

The directors should report that the business is

concern# with supporting assumptions or +ualifas necessary"

The board should ensure that an ob)ective andproessional relationship is maintained with theauditors"


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,i role of Auditors

The annual audit is one o the cornerstones o corporate governance" ,t provides anexternal and ob)ective chec$ on the way in which the fnancial statements have been

prepared and presented by the directors o the company"

The Cadbury Committee recommended that a proessional and ob)ective relationshipbetween the board o directors and auditors should be maintained# so as to provide to alla true and air view o company%s fnancial statements"

Auditors% role is to design audit in such a manner so that it provide a reasonableassurance that the fnancial statements are ree o material misstatements

urther# there is a need to develop more e0ective accounting standards# which provideimportant reerence points against which auditors exercise their proessional )udgement"

*very listed company should orm an audit committee which gives the auditors direct

access to the non-executive members o the board" The Committee urther recommended or a regular rotation o audit partners to prevent

unhealthy relationship between auditors and the management"

,t also recommended or disclosure o payments to the auditors or non-audit services tothe company"

The Accountancy 5roession# in con)unction with representatives o preparers o accounts#should ta$e the lead in@- i! developing a set o criteria or assessing e0ectiveness1 ii!developing guidance or companies on the orm in which directors should report1 and iii!developing guidance or auditors on relevant audit procedures and the orm in whichauditors should report" ;owever# it should continue to improve its standards andprocedures"


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,,, *ights and *esponsibilitiesof $hareholders

The shareholders# as owners o the company# elect the

directors to run the business on their behal and hold themaccountable or its progress"

They appoint the auditors to provide an external chec$ onthe directors8 fnancial statements"

The Committee%s report places particular emphasis on theneed or air and accurate reporting o a company%s progressto its shareholders# which is the responsibility o the board"

,t is encouraged that the institutional investors9shareholdersto ma$e greater use o their voting rights and ta$e positiveinterest in the board unctioning"

.oth shareholders and boards o directors should considerhow the e0ectiveness o general meetings could beincreased as well as how to strengthen the accountability oboards o directors to shareholders"


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.e 6 cgTopic J > $arbanes O6ley Act 899:


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$arbanes O6ley Act 899:

The 'arbanes xley Act was enacted in the year 2EE2 with a view to protec

investors by improving the accuracy and reliability o corporate disclosurespursuant to the securities laws and or other purposes"

'ome o the main provisions o the Act are@-

B" The Act called or establishment o the 5ublic Company Accounting vers.oard# whose duties are to@-

register and regulate all public accounting frms that prepare audit repor

establish or adopt# or both# by rule# auditing# +uality control# ethics#independence# and other standards relating to the preparation o audit r

conduct inspections o registered public accounting frms1 conduct investigations and disciplinary proceedings concerning# register

public accounting frms and associated persons o such frms1

perorm such other duties or unctions to promote high proessional stan

among# and improve the +uality o audit services o0ered by# registered paccounting frms and associated persons in order to protect investors# orurther the public interest1

enorce compliance with proessional standards# and the securities laws

to the preparation and issuance o audit reports and the obligations and


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2" ,t prohibits any public accounting frm rom providing non-audit services whileauditing frm" These services include@-

boo$$eeping or other services related to the accounting records or fnancial

statements o the audit client1

fnancial inormation systems design and implementation1

appraisal or valuation services# airness opinions# or contribution-in-$ind reports1

actuarial services1

internal audit outsourcing services1

management unctions or human resources1

bro$er or dealer# investment adviser# or investment ban$ing services1

legal services and expert services unrelated to the audit1 and

any other service that the .oard determines# by regulation# is impermissible"


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I" The lead audit and reviewing partner must rotate o0 the audit

every J years"

" The Act calls or the ormation o an independent and competentaudit committee# which is directly responsible or the appointment#compensation# and oversight o the wor$ o any registered publicaccounting frm and o auditor%s activities"

J" *ach registered public accounting frm that perorms or any issuerany audit shall timely report to the audit committee o the issuer@-

i! all critical accounting policies and practices to be used1

ii!all alternative treatments o fnancial inormation within generallyaccepted accounting principles that have been discussed withmanagement o4cials o the issuer# ramifcations o the use o suchalternative disclosures and treatments# and the treatment preerredby the registered public accounting frm1 and


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K" *ach audit committee shall establish procedures or@-

i! the receipt# retention and treatment o complaints received by the issuer regaraccounting# internal accounting controls# or auditing matters1 and

ii! the confdential# anonymous submission by employees o the issuer o concern+uestionable accounting or auditing matters"

L" The Act re+uires that the principal executive o4cer or o4cers and the fnancial o4cer or o4cers# or persons perorming similar unctions# to cerfnancial statements accurately and airly represent the fnancial condition

o operations o the company# in each annual or +uarterly report fled or s

D" The Act re+uires rapid disclosure o material changes in the fnancial cooperations o the frm# which may include trend and +ualitative inormatiographic presentations# as necessary or useul or the protection o investothe public interest"


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" ,t prohibits loans to any o the frm8s directors orexecutives"

BE" ,t re+uires that each annual report contain an intecontrol report"

This report shall state

the responsibility o management or establishing and impade+uate procedures or fnancial reporting#

as well as contain an assessment o e0ectiveness o internstructure and procedures#

any code o ethics and contents o that code"


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.e 6 cgTopic K > "egal 0 O*)A#AT#OA" !ramewor5

c.g. 0 committee reports


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egal ramewor$

An e0ective regulatory and legal ramewor$ is indispensabproper and sustained growth o the company"

The important legislations or regulating the entire corporastructure and or dealing with various aspects o governancompanies are Companies Act# BJK and Companies .ill# 2

These laws have been introduced and amended# rom time

to bring more transparency and accountability in the provcorporate governance"

'econdly# the 'ecurities Contracts Fegulation! Act# BJK# and *xchange .oard o ,ndia Act# B2 and 7epositories Ahave been introduced by '*.,


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The companies Act# BJK

The Companies Act# BJK is the central legislation in ,ndia tha

empowers the Central Government to regulate the ormation#unctioning and winding up o companies"

,t applies to whole o ,ndia and to all types o companies# whregistered under this Act or an earlier Act"

,t provides or the powers and responsibilities o the directorsmanagers# raising o capital# holding o company meetings#maintenance and audit o company accounts# powers o inspe

,t empowers the Central Government to inspect the boo$s o o a company# to direct special audit# to order investigation ina0airs o a company and to launch prosecution or violation o


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The main ob)ectives with which this Act has been introduce

i! help in the development o companies on healthy lines1

ii! maintain a minimum standard o good behaviour and buhonesty in company promotion and management1

iii! protect the interests o the shareholders as well as the

iv! ensure air and true disclosure o the a0airs o compan

annual published balance sheet and proft and loss account

v! ensure proper standard o accounting and auditing1

vi! provide air remuneration to management and .oard oas well as to company%s employees1 etc"


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'ome important provisions are@

*very company shall in each year# hold in additany other meetings# a general meeting as its angeneral meeting and shall speciy the meeting ain the notices calling it1

Hot more than fteen months shall elapse betwdate o one annual general meeting o a compathat o the next"

At each annual general meeting# every companappoint an auditor or auditors to hold o4ce rom


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'ome important provisions are@

*very auditor o a company shall have a right o access at all timeboo$s and accounts and vouchers o the company# whether $ept o4ce o the company or elsewhere#

Auditor shall be entitled to re+uire rom the o4cers o the compainormation and explanations as the auditor may thin$ necessary perormance o his duties as auditor"

The auditor shall in+uire@- i! whether loans and advances made by the company on the basis o sec

been properly secured and whether the terms on which they have been mpre)udicial to the interests o the company or its members1

ii! whether transactions o the company which are represented merely bentries are not pre)udicial to the interests o the company1 etc"

The companies Act#


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The companies Act#BJK 'ome important provisions are@

,n the case o every company# a meeting o its .oard o directors shall be held

at least once in every three months and at least our such meetings shall beheld in every year"

*very public company having paid-up capital o not less than fve crores orupees shall constitute a committee o the .oard $nows as %Audit Committee

%Audit Committee% which shall consist o not less than three directors and suchnumber o other directors as the .oard may determine o which two thirds othe total number o members shall be directors# other than managing orwhole-time directors"

The Audit Committee should have discussions with the auditors periodically

about internal control systems# the scope o audit including the observations othe auditors and review the hal-yearly and annual fnancial statements beoresubmission to the .oard and also ensure compliance o internal controlsystems"

The recommendations o the Audit Committee on any matter relating tofnancial management# including the audit report# shall be binding on the.oard" , the .oard does not accept the recommendations o the AuditCommittee# it shall record the reasons thereo and communicate such reasonsto the shareholders"


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Companies .ill# 2EE

Mainly aimed at@-

i! laying down the process o appointment and +ualifcation o audit

ii!prohibiting non-audit services by the auditors1

iii!prescribing compulsory rotation# at least o the Audit 5artner1

iv!re+uiring certifcation o annual audited accounts by both C* and

v!or reorming the boards# the bill included that remuneration o no

executive directors can be fxed only by shareholders and must beA limit on the amount which can be paid would also be laid down"

vi! ,t is also envisaged that the directors should be imparted suitable


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'ebi acts

'ecurities Contracts Fegulation! Act# BJK

'ecurities and *xchange .oard o ,ndia Act# B

7epositories Act# BK


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FGAH,NAT,HA FAM*/FO

The organi&ational ramewor$ or corporate governance initiatives in ,ndia the Ministry o o Corporate A0airs MCA! and

the 'ecurities and *xchange .oard o ,ndia '*.,!"

The frst ormal regulatory ramewor$ or listed companies specifcally orgovernance was established by the '*., in ebruary 2EEE# ollowing therecommendations o Oumarmangalam .irla Committee Feport"

The Ministry o o Corporate A0airs had also appointed a Haresh Chandra on Corporate Audit and Governance in 2EE2 in order to examine various cgovernance issues"

,t had also set up a Hational oundation or Corporate Governance HCGassociation with the C,,# ,CA, and ,C', as a not-or-proft trust to provide a deliberate on issues relating to good corporate governance


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Oumar manglam birla committe

'*., ormed this committee in B to promote 6 raise the standard o c

governance in listed companies in ,ndia Mr" Oumar Mangalam .irla headed this committee

The report consisted o some mandatory 6 non-mandatory recommenda

The committee8s report discusses corporate governance under the ollowheadings .oard o 7irectors

Audit committee

Femuneration o 7irectors

.oard procedures

Management

'hareholders

Feport on Corporate Governance

Compliance


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.oard o 7irectors

Hot less than JEP o the board would comprise non-executivdirectors

The no" o independent directors will depend upon whether tchairman is executive or non-executive

,ncase o non-executive# at least B9Irdo the board should co

independent directors ,ncase o executive# atleast one hal o the board should com

independent directors

All pecuniary relationships or transactions o non-executive dwith the company should be disclosed in the annual report


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Audit Committee

,t will consist o minimum I non-executive directors 6 ma)othem will be independent"

The chairman o the committee shall be an independent diwill attend AGM to answer shareholders +ueries

The audit committee will meet at least thrice a year

Fole o audit committee will include Appointment9removal o external auditors

versight o fnancial reporting system

Feview o fnancial statements

7iscussion with internal auditors# etc


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Femuneration o the 7irectors

,n annual reports corporate governance sectionollowing disclosures on details o the director8sremuneration will be made@ Femuneration pac$ages o all the directors

ixed portion o the remuneration 6 perormance linincentives

'ervice contracts# notice period 6 severance ees

'toc$ options# i any


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.oard 5rocedures

.oard meeting will be held at least times in a with a maximum gap o our months between ameetings

A director shall not be a member o more than B

as a chairman o more than J committees acroscompanies in which he is a director


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(anagement

A management 7iscussion 6 analysis report should orm a part o the annual reposhareholders"

The report will include the ollowing points# within limits set by company8s compet ,ndustry structure 6 development

pportunities 6 threats

'egment wise or product wise perormance

utloo$

Fis$s 6 concerns

,nternal control systems 6 ade+uacy inancial perormance with respect to operational matters

Fis$s 6 concerns

,nternal control system 6 ade+uacy

inancial perormance with respect to operational matters

Material developments in human resource industrial relations ront including number o pers

Oumar manglam


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gbirla committee

'hareholders

'hareholders9investors grievance committee to be ormed

Feport on Corporate Governance

,n annual report o the company a separate section on Corporate G

Hon compliance with any mandatory re+uirement will be highlighte

Compliance

'tatutory Auditors shall give a compliance certifcate regarding concorporate governance

This certifcate will be sent along with annual returns to the stoc$ e


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Hon Mandatory Fe+uirements

All companies should set up a remuneration como .oard o 7irectors

The hal yearly declarations o fnancial perormshould be sent to each o the household o

shareholders To ma$e corporate democracy real# shareholder

are unable to attend general meetings should bto vote by postal ballot so ar as $ey decisions aconcerned


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5reeta Mam

%usiness &thics


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%usiness &thics

The standards o conduct and moral values governing actions and de

the wor$ environment" 'ocial responsibility"

.alance between what8s right and what8s proftable"

ten no clear-cut choices"

ten shaped by the organi&ation8s ethical climate"

,mportance and Heed or


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A business organi


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QA?*' Qalues are a general term reerring to those things which peop

regard as good# bad# right# wrong# desirable# )ustifable et c

Qalues describe what is important in a person8s lie while ethicand morals what is appropriate in or is not considered in onelie"

Qalues are potent source o con(ict as well as o co-operatiocontrol and sel-control"

Qalues are collective representations o what constitutes a goosociety"

=aluesare potent sources o con(ict as well as o co-operatiocontrol and sel-control" Through values# business can and doecreate value in the orm o goods# service# employment etc"

;owever in extreme cases business and whole industries cacease to unction because their continued existence inconsistent with certain powerul values"

T>3&$ O! =A"?&$


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Qalues are many types"B" Cultural norms represent the expectations o

business clients and customers# legislatoremployee# suppliers and the public!

2" Moral values-These are deep-seated ideas aneelings that maniest themselves as behavior oconduct" These values are not so easy to measure oexpress in words"

TATA 't l


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TATA 'teel

The fve core Tata values are@

,ntegrity

?nderstanding

*xcellence

?nity

responsibility

HFM'


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HFM'

Horms are expectations o proper behav

re+uirements or that behaviors" *ach individuthe society has a set o norms# belie and valtogether orm his or her moral standard"

Horms are the ways an individual expects all p

act# when aced with a given situation" *g@ Asian students normally bend slightly while aproessors o the other university"

ower level employees address the higher level emsir"

. li


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.elie

The belie in an ethical code are standards o

These are the ways that the senior executiveorganisation want others to thin$" The intentiencourage ways o thin$ing and patterns o athat will pave way towards the wanted behavexpressed in a positive orm in an ethical code"

M l t d d b li d th i


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Moral standard# belie and their

aw is a dynamic entity since the rules prevalent now will change

period" 'everal changes have already occurred regarding epollution etc" Conse+uently# the law governing these have changed

*g" Actions ound legal 2E yrs ago such as racial and sexual discrhiring # discharge o chemical wastes into la$es# rivers etc" are now

All these changes in the law# is due to the changes in the moral sta

ma)ority o the population trough social and political process"

&T#C$ A+ (O*A"#T>


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&T#C$ A+ (O*A"#T> *thics is study o morality or morality is the sub)ect matter whichinvestigates ethics"

Morality is the standards that an individual or a group has aboutwhat is right and wrong or good or evil

*ach individual within the society has a set o norms# belies andvalues that together orm his or her moral standard"

(oral standards include the norms ( expectation of propebehavior, not requirements for that behavior) we have about the$inds o actions we believe are morally right and wrong# as well asthe values we place on what we believe is morally good or morallybad"

*g@ believed it was wrong to lie and to endanger the lives o othersand believed also that integrity is good and dishonesty is bad"

MFA,TR


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Morality can be defined as the standards that an individual or a group has

about what is right and wrong or good and ev

1. How to distinguish moral standards from standards that are not morEthicists suggested five characteristics to identify moral standar

Moral standards deal with matters which people think can seriou

injure or seriously benefit human beings.

2. Moral standards are not established or changed by political or le

authoritative bodies. he validity of moral standards rests on t

ade!uacy of the reasons.

". Moral standards are preferred to other standards including even se

interest when choice is there.

$. Moral standards are impartial. hey are based on impartial reasons t

an impartial observer would accept.

%. Moral standards are associated with special emotions. &hen people

in violation of a moral standard' they feel guilty' ashamed a


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(oral norms can usually be expressed as gene

about our actions# such as @ :Always tell the truth#

business ethics midterm

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