Chapter 5 Ethical Decision Making

Learning Objectives Provide a comprehensive model for ethical decision making in business Examine issue intensity as an important element in the ethical decision-making process Introduce individual factors that influence business ethical decision making Introduce organizational factors that influence business ethical decision making

Learning Objectives (continued) Explore the role of opportunity in ethical decision making in business Understand normative considerations in ethical decision making Recognize the role of institutions in normative decision making Examine the importance of principles and core values to ethical decision making

Figure 5.1 - Framework for Understanding Ethical Decision Making in Business

Ethical Issue Intensity Relevance of an event or decision in the eyes of an individual, work group, and/or organization Reflects the ethical sensitivity of an individual or a group in facing the ethical decision making process

Individual Factors in Ethical Decision Making Gender Education Locus of control Age Nationality

Organizational Factors Corporate culture Ethical culture Significant others Obedience to authority

Opportunity Conditions in an organization that limit or permit ethical or unethical behavior Results from conditions that either provide rewards or fail to erect barriers against unethical behavior Relates to an individual’s immediate job context Can be eliminated by formal codes, rules, and policies Gained by individuals through exposure to company information

Business Ethics Intentions, Behaviors, and Evaluations Ethical dilemmas occur when rules governing decisions are vague or in conflict There are no substitutes for critical thinking and the ability to take responsibility for one’s decisions Ethical decision making process includes individuals’ intentions and the final decision regarding what action they choose Work culture impacts recognition and judgement

Using the Ethical Decision-Making Model to Improve Ethical Decisions Ethical decision-making model does not help in determining if a business decision is right or wrong Provides insights about ethical decision making in businesses Business ethics involves value judgments and collective agreement about acceptable patterns of behavior Gaining an understanding of the factors that make up ethical decisions helps in differentiating between an ethical issue and a dilemma

Normative Considerations in Ethical Decision Making Normative approach: Examines what the ideal standard should be in ethical decision making Within the firm as well as the industry Normative rules and standards are based on individual moral values and the collective values of the organization

Institutions as the Foundation for Normative Values Organizations operate based on institutional norms and rules Organizations face normative pressures from different institutions to act in a way prescribed by the institution Normative business ethics considers the political realities outside the legal realm as industry standards

Institutions as the Foundation for Normative Values (continued) Nature of competition can be shaped by the economic system Helps determine how a particular country or society distributes its resources in the production of products Values made normative by social institutions are followed by businesses to compete fairly

Implementing Principles and Core Values in Ethical Decision Making John Rawls Believed justice principles were beliefs that everyone could accept Veil of ignorance by Rawls Examined how individuals would formulate principles if they were uncertain about their future position in society

Implementing Principles and Core Values in Ethical Decision Making (continued 1) Principles of justice by Rawls Liberty principle - States that each person has basic rights that are compatible to the basic liberties of others Difference principle - States that economic and social equalities (or inequalities) should be arranged to provide the most benefit to the least-advantaged members of society

Implementing Principles and Core Values in Ethical Decision Making (continued 2) Companies convert basic principles into core values Core values: Provide the abstract ideals that are distinct from individual values and daily operational procedures Include operating in a sustainable manner, collaboration and teamwork, and avoiding bribery Provide a blueprint into the firm’s goals and how it views ethical decision making

Figure 5.2 - Principles and Values

Understanding Ethical Decision Making Top level support for ethical behavior is instrumental in helping employees engage in their personal approaches to ethical decision making Normative perspectives set forth ideal goals to which organizations should aspire Knowledge about ethical decision making helps in making good decisions