1. A P A P E R P R E S E N T E D A T T H E I I C F I P G L O B A L
C O N F E R E N C E 2 0 1 4 O N 2 3 R D A P R I L 2 0 1 4 H E L D A T T H E
K E N Y A I N S T I T U T E O F C U R R I C U L U M D E V E L O P M E N T
N A I R O B I , K E N Y A
B Y C P A M O H A M E D E B R A H I M – C F I P , M B A
( M A N C H E S T E R ) , A C M A , C G M A , F F A , F C T
Creating a Business Culture Based
on Ethics

2. 1. WHAT IS BUSINESS ETHICS
Business ethics as we define the term is “the ethics
underpinning business”, so in order to appreciate the
ethics we need to understand the different schools of
philosophy on which the fundamentals of ethics are
based. The fundamentals of business ethics are about the
mapping of the value set into the management decisions
of the business. Business ethics begins with the premise
that subjective concepts like ethics and morality are
consistent with the economist‟s notion of rational self-
interest. The problem is applying this premise to the
business and to corporate management and employee
behaviour. Businesses usually codify the value set into a
code of ethics.

3. 1.1 Aspects of Business Ethics
Business ethics has two aspects: one involves the specific
situations in which ethical controversy arises; the other
concerns the key principles of behaviour that can be
applied both within the firm and across the family of
stakeholders. Business ethics is not necessarily a new
phenomenon. In 18th and 19th century, for
example, business transactions were largely conducted
on the principle of caveat emptor, a principle carried
through to the 21st century. The onus is on the purchasers
of goods and services to assure themselves that the
products they tended purchasing were of the quality for
which they would hope, and the vendor‟s duty was simply
to fulfil a few legal obligations

4. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.1 SUBJECTIVISIM – IT IS UPTO THE INDIVIDUAL
The ethical theory that moral judgements are “up to the individual”
was based on the concept of self-realisation expounded by among
others F.H Bradley (1846 -1924), who claimed that there is a ideal
self to which each individual strives to achieve. It is also supported
by the existentialist movement which tends to recommend that in
matters like ethics the important thing is not what you decide but
that you decide. Another theory that to an extent supports this
theory is that of “emotivism” as propounded by the British
philosopher A.J Ayer (1910 to 1989). Ayer held that Ethical
assertions need not be verifiable as they have emotive meaning
unlike scientific assertions, which should be independently
verifiable. The American philosopher contended that ethical
statements were like imperatives. The Oxford philosopher R.M.
Hare formulated a logic of imperatives, a system of espousing good
and bad reasoning on an ethical position, which does not
determine which is true or false.

5. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.2 CULTURAL RELATIVISM– EVERYONE DOES IT
Cultural relativism implies what is right or wrong depends is
relative to time and place. This relativism is inspired by several
considerations namely:-
 Firstly it acknowledges that human beliefs and practices varies
from one time to another and one place to another.
 Secondly it is a reaction against the arrogance of one culture over
another which claims to have a monopoly of the truth.
 Third, in the area of ethics, relativism accommodates the fact that
there are important moral differences between cultures which are
difficult to resolve.
The logic behind this theory is that people from one part of the
world or one time in history and another place or time in history
are not superior or inferior to another, but simply different. Its
primary assertion is that ethic‟s is as dynamic as a society and
ethical values move with changes in society.

6. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.3 CONSEQUENTALISM – BETTER OF TWO EVILS
This school of ethical theory contends that the circumstances
surrounding a ethical problem makes a difference to the decision that
is taken. To the “consequentialist” what is important is not ethical
principles but the outcome of the ethical decision. The best known
school of thought is Utilitarianism, traditionally the utilitarian holds
an action is good as long as they are conductive to the “greatest
happiness to the greatest number of people”. Philosophers
associated with utilitarianism are Jeremy Bentham (1748- 1832) and
John Stuart Mills ( 1806 – 1873). Bentham asserts “humankind is
subject to two masters pain and pleasure, which govern all we do”. An
action is right or wrong depending on whether it harms people by
making them suffer pain, whether physical or psychological. This
theory was further refined by G. E. Moore (1873- 1858) who
introduced the concept of “ideal utilitarianism” giving greater status to
intellectual pleasures. The concept of the law of diminishing marginal
utility also comes into play, as the pleasure derived by an increase in
pay of Kshs 10,000 to a cashier in a supermarket earning Kshs 20,000
is greater than the same increase to an accountant earning Kshs
200,000 in the same supermarket‟s head office.

7. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.4 NON-CONSEQUENTIALISM – IT IS SIMPLY WRONG
Religious morality is one school of thought in this family of ethical
theory, which asserts that there are indeed actions which are right or
wrong, and there are fundamental moral principles which stand true in
all time and at all places, as given by a divine law giver, this is common to
Judaism, Christianity and Islam.
Respect for persons – Kantian ethic‟s of duty is another school of thought
in this family of ethical theory, however unlike the above the emphasis is
not on a divine law giver, but rather on human reason as the arbiter of
right or wrong. The German philosopher, Immanuel Kant (1724 to 1804)
believed that the essence of morality was found in reason, by a process of
rational deduction.
NB: Kant‟s theory has its roots in the philosophy of Aristotle (384 -322
BCE) who defined humans as rational animals and the French
renaissance philosopher Descartes (1596- 1650) who stated “I
think, therefore I am”, he contended that humankind was distinguished
from the animal kingdom because of the powers of reason.

8. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.4 NON-CONSEQUENTIALISM – IT IS SIMPLY WRONG
Kant‟s contribution is the formulation of the categorical imperatives :-
First, “I ought never to act except in such a way that I can also will that
my maxim should become a universal law.”
Second, “Act in such a way that you always treat humanity never simply
as a means, but always at the same time as an end”
Third, "that all maxims which stem from autonomous legislation ought to
harmonize with a possible realm of ends as with a realm of nature. So act
as if your maxims should serve at the same time as the universal law "
In principle the third imperative synthesis the first two
imperatives, meaning that we should so act that we may think of
ourselves as "a member in the universal realm of ends
“ legislating universal laws through our maxims (that is, a code of
conduct), in a "possible realm of ends". None may elevate themselves
above the universal law, therefore it is one's duty to follow the maxims.

9. 2. PHILOSOPHICAL SCHOOLS WHICH
PROVIDE A BASIS FOR BUSINESS ETHICS
2.5 NATURAL LAW – AN ETHICS OF RIGHTS
The ethical theory that acknowledges the supremacy of rights is the
“natural law theory”, its asserts rights rather than duty are primordial
in determining ethical action. Duties can only be defined in terms of
rights e.g. my right to property generates your duty not steal it or the
public‟s/stakeholders right to information generates the government‟s
or corporate entity‟s duty to tell us the truth in its stewardship reporting
responsibilities.
The most important philosopher to propound this theory was John
Locke (1632-1704), he asserts “To understand political power
aright, and derive it from its original, we must consider, what state all
men are naturally in, and that is, a state of perfect freedom to order
their actions and dispose of their possessions and persons, as they think
fit, within the bounds of the law of nature, without asking leave, or
depending upon the will of any other man.” Locke identifies two
principle rights one the right to freedom to act and secondly the right to
property including intellectual property, copyright and patent rights
and property of one‟s person.

10. 3. ETHICAL CRITERIA
3.1 ETHICAL CRITERIA: ‘NO DIFFERENCE THEORY’
The law is the most important source for ensuring that consumers
receive a fair deal from retailers and manufacturers. The various
health and safety laws have ensured substantial improvements in
working conditions for employees. Contract law entails that
employers no longer have complete freedom to make contracts or
in many jurisdictions trades unions represent the workers in
wage and work conditions. Notwithstanding the advances in the
law, this does not mean that business can leave the law to resolve
its moral dilemmas. Management are expected to act in a
responsible manner. Either management ascribe to the „no
difference theory‟, whereby they should maintain the same
standards of ethical behaviour in business as they would in their
private lives or they ascribe to the value set within the firm.

11. 3. ETHICAL CRITERIA
3.2 ETHICAL CRITERIA: GOOD ETHICS MEANS GOOD BUSINESS
This view of business ethics is often referred to as the
coincidence theory: virtue and prosperity fortuitously coincide.
If a firm sells defective goods, customers will simply discontinue
purchasing the firm‟s products. Management desires to avoid
legal disputes and wish to ensure that the firm‟s activities from
hiring and firing employees, supply chain management to
selling and sales all fall within best practice. An ethically „clean‟
firm runs less risk of litigation. Litigation and adverse publicity
have followed all the major disasters in the business world: the
Bhopal disaster in India, the Zeebrugge ferry disaster off the
coast of Belgium, Exxon oil spillage off the Alaska coast, Perrier
bottled water contamination in Europe. In many respects
legislation provides a baseline, below which business should not
stoop.

12. 3. ETHICAL CRITERIA
3.3 ETHICAL CRITERIA: KANTIAN REASON (1 of 2)
In considering whether religion itself is the ultimate source of moral
authority, Europe‟s Age of Enlightenment in the 18th and early 19th centuries
was marked by an emphasis on human reason. In matters of morality, what was
right or wrong, good or bad, was not to be accepted simply because of divine
authority or the authority of a Church; rather human reason could be trusted as
the arbiter of truth, right and wrong, bad and good. The German
philosopher, Kant, believed that the essence of morality was to be found in
reason: it was by a process of rational deduction (as distinct from religious faith)
that one could discover the basis of right and wrong.
The first thing that reason tells us, Kant argued, is that one‟s duty is to be done
for duty‟s sake. Morality is not the same as self interest, or even benevolence. If
the fact that Jones is an employee were the reason for treating him well, then
management would be let off the hook if, say, management were to quarrel with
him, and the friendship were to come to an end. In other words, feeling of
friendship or compassion for others cannot constitute truly moral grounds for
acting. The moral law, Kant argued, was to be obeyed because it is the right thing
to do, not because of any consequences, which accrue to moral behaviour.

13. 3. ETHICAL CRITERIA
3.3 ETHICAL CRITERIA: KANTIAN REASON (2 of 2)
The second point, which Kant noted about the moral law was that it is
by nature universal, unless there is an exception. For example, Mr A in a
poor country may accept bribes whereas Mr B in a relatively rich
country may not. Each are acting according to different principles or
maxims: the poor man, ex-hypothesis, has no means of survival.
A „maxim‟ for Kant is the personal principle on which we act. He defined
his categorical imperative, a basis for Kantian moral theory as follows:
“I ought never to act except in such a way that I can also will that my
maxim should become a universal law”. Therefore, for bribery or theft
to be right in one set of circumstances but wrong in another there must
be a relevant difference in those circumstances and hence in the maxims
on which the various parties are acting. But can the maxim become
universal?
In order to answer the question, critics of Kant, have introduced
additional principles to those identified by Kant. The debate need not
detain us. Suffice to say that Kant insists that his moral theory is
independent of the consequences.

14. 3. ETHICAL CRITERIA
3.4 ETHICAL CRITERIA: UTILITARIANISM (1 0f 2)
As in our example, in making a moral decision, one might
balance one person‟s welfare against someone else‟s and reach
a decision on the basis of which course of action achieves the
greatest good. To argue in this way is to adopt what is referred
to as a „consequentialist‟ approach to morality. Unlike
Kantianism, what is really important for consequentialists is
not moral principles that seem to be carved in tablets of stone
but outcomes of ethical decisions. The best known of the
theories is utilitarianism, which holds that actions are right in
so far as they are conducive to the greatest happiness of the
greatest number of people and wrong in so far as they are not.
The utilitarian is not recommending that right actions must
invariably produce large amounts of happiness. Let us suppose
that the management team notes that the firm is losing market
share to its competitors (say) because it has not kept up with
innovative new product designs.

15. 3. ETHICAL CRITERIA
3.4 ETHICAL CRITERIA: UTILITARIANISM (2 0f 2)
Management have a choice: either they introduce new technology and offer
redundancies or alternatively suggest a reduction in wages. If they do not
introduce new technology the firm will probably continue to be uncompetitive
and eventually close. Firm closure will have much worse consequences than the
alternative. The greatest happiness in this case really translates into the least
misery. This raises two further issues: (i) there is an over-emphasis on the
amount of happiness with no reference to the distribution of happiness; and, (ii)
individual actions are piecemeal. Combined these two issues raise an important
point: is human happiness the only consideration to be taken into account when
deciding what is right and wrong?
In the example above, an element of justice could be introduced into the choice of
wage reductions. Suppose workers receive Kshs. 8,000 and management receive
Kshs 80,000. Management have a choice: it can award itself a reduction in
payments with a meagre increase for workers or it can endure a management
wage freeze until the firm recaptures its lost market share.
Alternatively, management could introduce voluntary redundancy schemes or a
performance related pay structure. These solutions are more just than any
arbitrary reduction in wages and they are also relevant to determining what is
right or wrong. And such a determination requires the adoption of rules within
the firm, which are defined in terms of duties.

16. 4. THE BUSINESS VALUE SET
RIGHTS AND DUTIES
Ethics, through beliefs and values form the building blocks of organisational
behaviour. Values and beliefs are part of the cognitive sub-structure of an
organisational culture. Values are intimately connected with moral and
ethical codes, and determine what people think „ought‟ to be done. For
example, individuals and organisations that value honesty, integrity and
openness consider that they (and others) should act honestly, openly and
with integrity because that is the right thing to do.
Beliefs on the other hand concern what people think is and is not true. The
value set is composed of rights and duties. The distinction is reasonably
straightforward. For the most part, rights and duties are the opposite ends of
the same coin. If management as an employer has a duty to ensure
reasonable standards of health and safety for workers, workers have a right
to expect it. If it is believed or if it has become a market norm that workers
have a right to a minimum wage, then management as employers have a duty
to pay it. These rights and duties can be categorised in three parts:-
 General rights and duties
 Legal rights and duties
 Role-specific rights and duties

17. 4. THE BUSINESS VALUE SET
RIGHTS AND DUTIES
4.1 General rights and duties
General rights and duties are moral entitlements in which
everyone shares and are universally recognised e.g. a duty not
to cheat, for example, or a duty not to steal.
4.2 Legal rights and duties
Legal rights and duties are more circumscribed. They only apply
within certain jurisdictions. In many jurisdictions legal rights
and duties are defined through statutes passed by
parliament, through common law, and through legal
judgements handed down in courts, which establish
precedents, that is, case law. Although there is an overlap
between law and ethics (for example, it is both illegal and
unethical to sell „spoilt‟ products), some actions are unethical
but not illegal, and (less commonly) vice versa. Breaking a
promise made to a friend is usually not illegal, but is unethical
unless some very good reasons can be found to the contrary.

18. 4. THE BUSINESS VALUE SET
RIGHTS AND DUTIES
4.3 Role Specific rights and duties
Within the firm, there are role-specific rights and duties. For
example, all workers have a right to use the firm‟s canteen or
parking spaces. A role-specific duty may also be a legal duty: for
example, the sales manager who failed to promote the firm‟s
goods could also be in breach of contract. Or a worker who
shirks on the production line would be failing in a role-specific
duty, but may not be acting illegally. While in so far as any role-
specific right or duty is moral as opposed to legal, it derives its
moral force from being a restricted instance of a general right or
duty. Our sales manager or worker, for example, could be
demonstrating an absence of a firm-specific value set: in other
words, the value set within a firm is akin to a universal morality.
In the absence of a value set represented by a corporate code of
ethical conduct, there is a role-specific failure of a general moral
duty of fidelity within the business.

19. 5. CONCLUSION
Creating a business culture based on ethic‟s requires the
entity (corporate, firm, government department, quasi-
government agency and not for profit organisation) to
develop its own ethical value set commonly called the
“Code of Ethical Conduct”. Each entity should consider
the business they are in, the environment they operate in
and the ethical theories and philosophy expounded above
to develop their own code of conduct, which serves the
markets, the era and society they operate. I believe every
organisation is unique as its principal stakeholders will
determine which theories to place emphasis.
THANK YOU

30. Mombasa
Ace House, 3rd Floor Narok Road- Off Jomo Kenyatta Avenue
PO Box 16916-80100, Mombasa, Kenya
Nairobi
KMA Centre, 7th Floor, Mara Road, Upper Hill
Emails :
mebrahim@acegroup.co.ke CPA Mohamed Ebrahim
asalyani@acegroup.co.ke CPA Ahmed Salyani
bmusani@acegroup.co.ke Bilal Musani
Website : www.acegroup.co.ke
CPA Mohamed Ebrahim MBA Manchester, FCFIP, FFA, FCT, ACMA-CGMA is a
partner/director in Ace Group of Companies ,which comprises the following entities:
 Ace Associates Certified Public Accountants a member firm of McMillan Woods
Ace Consultants Limited
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