Ethical Theory and Business

Executive Compensation Case

PERBANDINGAN GAJI
KARYAWAN DAN EKSEKUTIF

Lowes
t
worke
r

CEO

1960

12

1974

35

1998

182

2000

500

Kekayaaan
Gates, Allen, Buffet

Kekayaan 3 juta
masayarakat AS

Executives pay tie

to stock option
If stock raises, exe
pay increases

IS IT FAIR???????

Ethical dimension of Executive Compensation

Defende Perjanjian antara perusahaan dg
r
eksekutif yg hrs dihargai
Didasarkan
pada
kinerja
yg
dicapai dan risiko yg ditempuh
Sebagai insentif agar ekseutif
bekerja keras utk kepentingan
pemegang saham
Opposit
e

Board
tdk
independen
shg
keputusan bias utk kepentingan
eksekutif
Opsi saham sering direkayasa
agar nilainya naik (ct. repricing)
Bgmnpun perbedaan yg timpang
adalah tidak adil dan fair
Lebih diasarkan pada kerakusan
dan keegoisan

Utilitarian: The Consequences are Maximizing overall

goods

Not only to oneself

but everyone affected
by the act

Utilitarian, Democracy and Free Market

Consequences:

Democracy

Authoritarian

Free Market

People Want

Consequences:

The Critics of Utilitarian

1.

No consensus of how to determine the overall good

Utilitarian and Business Policy

EXPERT UTILITARIAN

vs

Deontology/Right Based Ethic

1. Act only in those ways in which the maxim of our acts could be

Rights theory

Rights correlate with Interest, but Interest

differs from Wants. Interests may collide or
coincide with wants.
Rights relate to human dignity that cannot be
sacrificed for overall good.
Human dignity is to let individuals make
rational choice as autonomous persons or as
subjects not as objects.
Thus, freedom to make our own choice is a
fundamental right.
Since all humans should have this same
character, equal treatment to others is also a
fundamental right.

Case of Child Labor

Utilitarian

Utilitarian

Deontology

Kantian

Virtue Ethics

Whereas deontology and utilitarian disregard personal emotions and

feelings, virtue ethics gives more affective side of our character.

school
work
friends
society
family
Shaped by

What
person we
should be?

GOOD
CHARACTER
Integrity,
honesty,
trustworthiness,,
caring,
empathetic,
charitable,
sympathetic,
modesty,
moderation, self
control,
unselfishness

BAD
CHARACTER
egoism,
selfishness,
greed,
materialism,
belligerence,
rudeness, self
indulgence,
callousness,
competitivenes
s

Good/Bad
Human life

Cases of virtue ethics

Excessive CEO pay

Aaron Feuerstein

Harm advertising to
kids

Good
character

Bad
character

Good
character

Bad
character

Good
character

Bad
character

modesty,

Greed,
materialis
m

Caring,
empathy

Self
center
competitiv
e

Caring, self
control

Selfish,
competitiv
e

Reject
excessive
pay

Justifying
excessive
pay

Take care
of
employees

Relocate
the plant

Not
advertising

Advertise
for
competitio
n and profit

Executive Compensation Case