Ethical Decision-making in Business

CHARACTERISTICS OF INDIVIDUALS Cognitive Biases Individual Differences CHARACTERISTICS OF ORGANIZATIONS Group and Organizational Pressures Organizational Culture MORAL AWARENESS ETHICAL JUDGMENT ETHICAL BEHAVIOR Process of Individual Ethical Decision-Making Behavior Ethical decision-making process

Moral awareness More likely to recognize moral issue when Peers consider it morally problematic Moral language is used when problem is presented Decision could cause serious harm to others

Sound ethical decision-making 1.Gather the facts 2.Define the ethical issues 3.Identify the affected parties 4.Identify the consequences 5.Identify the obligations 6.Consider your character and integrity 7.Think creatively about potential actions 8.Check your gut

Ethics and organizational culture 1.Who shapes your ethical decisions? 2.The Pygmalion effect 3.Rewards and punishments 4.Goals 5.Diffusion of responsibility 6.Roles and deindividuation

Ethics and the law The relationship between ethics and the law Corporate rules as “law” Discrimination laws Whistleblower laws Federal Organizational Sentencing Guidelines

Cognitive biases Fact gathering Overconfidence about your knowledge of the facts Falling into the confirmation trap So… Think about ways that you could be wrong

Cognitive biases Looking at consequences Reduced number of consequences Consequences for self vs. others Consequences as risk –Illusion of optimism and illusion of control Escalation of commitment So… Invite input, especially from those who disagree with you

Cognitive biases Thinking about integrity Illusion of superiority Ethics of your profession

Individual differences Level of moral development –Level 1: Rewards/punishments, exchanges –Level 2: Shared norms, societal obligations –Level 3: Principled, autonomous Locus of control Ego strength

Desired Moral Approbation “Desire for moral approval from oneself or others” Level of desired moral approbation (DMA) is an individual difference Study discovered three types of DMA –DMA from Others—Praise –DMA from Others—Blame –DMA from the Self

Scoring the Moral Approbation scale Average your responses for these 20 questions into three categories: DMA-OP1, 3, 5, 6, 8, 13, 16, 19, 20 DMA-OB2, 9, 10, 12, 15, 18 DMA-S4, 7, 11, 14, 17

Desired Moral Approbation averages DMA from Others—Praise4.93 DMA from Others—Blame4.35 DMA from the Self5.17

Approaches to moral judgment Utilitarianism Rights Justice Objectivism Social contract Care

Utilitarianism Decision rule –Maximize the common good Biggest pro –Replaces partiality with science Biggest con –The means don’t matter Example –“The Ones who Walk Away from Omelas”

Robert Nozick’s Rights Theory Decision rule –Freedom from force and fraud Biggest pro –Virtually complete freedom of action with minimal government intrusion Biggest con –Almost complete disregard of interests of others with a stake in behavior Example –Certain “payday loan” providers

John Rawls’ Theory of Justice Decision rule –Greatest benefit to the least advantaged Biggest pro –“Unbiased” approach to social justice Biggest con –Denies free will, meritocracy Example –Ben and Jerry’s Ice Cream

The “real” Rawls Incorrect approach in textbook Really… –Contractors are stripped of bias to decide on two principles of justice –“Greatest benefit…” rule the most challenging –Veil of ignorance is not used for decision making