Applied Business Ethics

SM0381

STUDENT NUMBER: 13012533

Submission Date: 6th January 2016
Total Word Count: 3268 words

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 Contents Page

Page No.
Ethical Dilemma Description 3

Why is it an ethical Dilemma? 4

Solutions 7

Appendix A 9

Appendix B 11

Appendix C 14

References 16

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Ethical Dilemma Description [302 words]

Definition

An ethical dilemma is defined as an experience of a choice between mutually

exclusive options where there are good reasons to make either choice. typical
issues faced by business managers are particularly wide and involves
questions about business purposes and the allocation of
resources(Northumbria University,2015) . Normative ethical theories provide
ways of thinking that help to make decisions.

The ethical dilemma that I wish to focus on is on the business of the Post
Office and Chief Executives decision on whether or not to close their loss-
making stores mainly situated in rural areas. There are a large number of
factors that need to be considered before the decision is made. The
government-owned post office is a network of franchise shops, providing a
collection point for benefits and pensions, as well as selling stamps and
financial services and products such as mortgages and savings accounts. The
CEO has to make what he feels is the best decision for him, or others, which
will later be explained using normative and descriptive ethical frameworks and
theories. This is a very difficult decision that the individual decision maker is
facing.
Either decision in closing or continuing to run the stores both have benefits
and drawbacks. If they are to remain open, it will allow those users who need
to access their pensions and benefits to do so and not have to travel long
distances, and there is a possibility that the store may eventually become
profitable. If they are to close, if will mean that they will be reducing the overall
losses of the company and benefiting shareholders, however it also means
that users of the local post office who are mainly elderly will have to travel
further to receive their pensions and benefits and it will also create job losses,
worsening economies in these areas.

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Justify why it is an ethical dilemma in a business situation (655 words)

The reason why I believe this is an ethical dilemma is because, either

decision to keep the stores running or to close them both have good
reasoning behind them.

Contextual factors will be a key role in the final decision made by the CEO, for
example, performance related pay. If the CEO would only receive a bonus if
all the stores that were open are profitable at year end, then it would be an
easy decision to close the stores in order to gain the bonus. This would be
linked to the Egoism theory where the decision maker is only concerned with
his own self-interest. (Rand,A.1957) if the CEO was focused on the business
as a whole, then he may feel it is best to close the stores so that the post
office is as profitable it can be and this could be linked to virtualist behaviours
and striving for excellence (MacIntyre, A.2007). These factors would impact
the final decision depending on the type of ethical behavior characteristics the
CEO follows.

The relative importance of the ethical issue has some bearing on the process
that the decision makers go through when faced with ethical dilemmas (Crane
& Matten, 2010). The impact the decision has on stakeholders is likely to
affect the decision makers final decision.

There are a large number of stakeholders that can be affected by the final
decision of the post office CEO. Firstly, customers will be affected because if
the store is to close then they will have to travel further in order to use the
post office services and claim their pensions/benefits, and because they live
in rural areas, it is likely that the next post office store will be located far away.
The employees will also be affected because ultimately the decision will affect
whether or not they will have a job, and those employees may have
dependents that rely on solely on that income. Local communities may also
be affected because there will be less money in the area due to job losses,
which may lead to a decline in the economy in that area and it can also lead

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to increased pressure on the local government by the community to attract
other companies to the area to boost the local economy.

Moral intensity is a construct that captures the extent of issue-related moral

imperative in a situation (Jones, 1991) TABLE A shows the moral intensity
framework applied to this particular dilemma.

TABLE A
MORAL INTENSITY FRAMEWORK
Component of Intensity Reasoning
M.I Level
Magnitude of High The final decision made has serious
Consequences consequences on the stakeholders involved, if
the store is to close, then the users/customers
will suffer due to needing to travel further to
collect their benefits or use the post office
services. If it is to stay open then the CEOs
performance may be reviewed by the board
and could affect his job position
Social Medium Either decision could be seen as viable to
Consensus society, the post office is a business and it
wouldnt make business sense to keep a loss
making operation open
Probability of High The decision will affect the security of the
Effect employees jobs
Temporal Medium/ This will be dependent on the decision and
Immediacy High how soon it is implemented, for example will
the stores be closed immediately or sometime
in the future.
Proximity Medium The decision will be affect the business the
CEO works for, however, he is not near to the
stores so wont feel any pressure from the
employees or local community, as he isnt

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 involved with them.
Concentration High This decision has the ability to affect a large
of Effect number of people within a small area. Those
living in the rural areas.

From TABLE A, it is clear to see that the moral intensity experienced by the
decision maker is high so the final decision is likely to be influenced by his
moral intensity felt in this dilemma.

The final decision may also be influenced by stakeholder salience, which is

the degree to which managers give priority to competing stakeholder claims
(Mitchell,R. 1997) The greatest priority will be given to those stakeholders
who have power, legitimacy and urgency. A stakeholder that possesses all of
these is classed as a definitive stakeholder. The CEO needs to consider
these types of stakeholders because of their attributes and how the decision
he makes will affect them.

Within this dilemma a definitive stakeholder could be the employee, this is

because they are legitimate as they are working for the company, have a form
of power because an employer union will back them and it is an urgent issue
because the CEOs decision has the ability to impact them immediately.
However, his own assessment of this stakeholders position may differ and is
subjective.

Using Kohlbergs (1958) Stages of Moral Development, the CEO could be

considered to be at Stage 4 Maintaining the social order: becomes aware of
the wider rules of society so judgments concern obeying the rules in order to
uphold the law and to avoid guilt (simplypsychology.org). Therefore
according to the theory, he will be likely to make a decision based on the
society norm he is surrounded in and the decision that avoids guilt.

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Ethical Solutions Proposed by the student to this dilemma (541 words)

From this dilemma the CEO has two very clear options. He can decide to
either continue running the stores so that the customers in rural areas can
continue to use their services, and hope that the stores can be profitable in
the future. Or he can decide to bring the stores to a close, increase the
profitability of the post office as a whole by not having those loss making
stores hindering the performance of the firm.

Using the Moral Intensity framework if he was to close the stores, then he will
feel considerably high moral intensity because a large number of people will
be affected by the decision. Due to this, he may feel pressure to keep his
moral intensity low and keep the stores open. However, because social
consensus is medium within the framework, this could be linked to my
assessment of the CEO using Kohlbergs (1968) Stages of Moral
Development where he is seen to be maintaining the social order so each
decision has its benefits and drawbacks and either could be seen as feasible
to society.

From the Stakeholder Salience Model the CEO needs to pay attention to the
employees who are the definitive stakeholders from this framework. Priority
may be given to their needs rather than the needs of a stakeholder with less
salience e.g shareholders. However, the CEOs judgment of the stakeholders
may differ and could feel that shareholders are the most definitive, therefore
will make his decision based on their needs.

If the CEO followed an Egoism approach (Rand, 1957) and was only
concerned with what would be best for him, then I believe this may influence
his decision and will feel strongly about closing the stores. This is because
doing so, will remove the loss making stores and will make his performance
look better when under review. It may also improve the CEOs Key
Performance Indicators such as Profitability and could lead to increased
bonuses and increase his job security and his term in the position

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From analyzing the frameworks, I believe that the most suitable course of
action would be to continue running the stores so to meet the needs of its
customers, to keep the CEOs moral intensity low and also to keep definitive
stakeholders happy, Also, he will be avoiding the most guilt because he will
not be creating job losses and taking away the employees livelihood, he will
also be preventing the elderly who use the post office from travelling further
particularly in icy conditions, jeopardizing there health. However it would be
difficult to argue which decision is the best, because closing of the stores
could also be suitable.

From this decision, the CEO may be exercising consequentialist utilitarianism

behaviour (Bentham, 1789) which is the theory that maximizes utility, defined
by (Bentham ,1789) as the aggregate pleasure after deducting suffering of all
involved in any action the decision would then be linked to Act Utilitarianism
theory because keeping the stores open will be doing the greatest good for
the greatest numberas a large amount of customers can continue to use the
stores, also the employees get to retain their jobs and provide income to their
families, as well as keep the local economies going from their spending.

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Appendix A Ethical Debate [663]

Within the ethical debate, each character had a different opinion on what they
considered to be ethical leadership and whether or not they agreed with the
statement that ethical leadership is impossible in a shareholder focused
economy.

The first argument that was raised from Deshi was that ethical leadership has
no place within industry due to the fact that he personally believes that being
ethical and that style of leadership can have a direct impact on the
maximization of the profits of the company. I thought this was a valid point
due to the fact that the Chinese culture and work environment are mainly
focused on maximizing profit and Chinese society believe that inequalities
amongst workers can be considered to be acceptable (World Bank,2013). His
views may be based on his cultural background. Deshi could be considered to
be an egoist type of person where he is only considered on his own self
interest. (A Rand,1957) However, he may only feel this way because he
doesnt have any industry experience which could affect his view on ethical
leadership. Deshi may also feel this way and use this opinion as an excuse as
to why he is doing poorly currently within his ethics module.

Jan disagreed strongly with the views of Deshi, believing that there is a need
for ethical leadership and the teaching of ethics within the business school,
she raised the issue of, how can we expect to know what ethics is and the
essentials behind it if it is not taught within schools? Jan could be considered
to be the prime example of an ethical leader, her company involves itself with
ethical activities and doesnt feel the need to publicise the work and she feels
like it is simply her duty to act ethical and carry out dutiful behavior which
would follow the Deontological Theory. Deontologists believe that ethical
rules bind people to their duty (PhilosophyBasics.com)

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However, if she was to not partake in such activities and spent this money on
company activities which would improve shareholder value, it could be
debated that this could be a better option. Jan is in the business of industrial
chemicals which cause a lot of harm to the environment, and therefore her
ethical activities may be fueled by the sense of guilt that she feels from
running such a company within that industry.

Mei-Hua agreed that ethical leadership has a place within shareholder

companies, however, she felt that rules can be altered if it is for the greater
good of the company. Her views could be linked to deontology (Kant,I 1992)
views as she follows the duties of her job and but she isnt too concerned with
ethics as a subject. She could also be considered to believe in Agency Theory
(Milgram,S. 1963); where managers act on shareholders best interests, and if
ethical leadership doesnt allow that, then it doesnt have a place in a
shareholder focused economy.

Mike believes that ethical leadership is possible and feels that there are
ethical codes that need to be followed in order to ensure sustainability of
companies. Mikes views may be bias due to him working as a business ethics
lecturer and by being involved with Greenpeace who are concerned with
ethics. Deshi argued the fact that Mike has always been a lecturer and has
never been within the business world and therefore doesnt understand what
happens within the industry and the impact this can have on ethical decisions.

Within the real world, ethics is a contentious issue. Since the Global Financial
Crisis in 2008, many business schools have been criticized for the teaching of
students, as they are only concerned with shareholder wealth maximization,
Students are convinced that nitty-gritty work can be done without consciously
considering factors such as values and ethics (Podolny, J, 2009)

To conclude, I believe that ethical leadership does have a place within the
work industry, however, it is difficult to totally eliminate unethical leadership
and behavior because peoples beliefs and characteristics differ.

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Appendix B: Ethical Dilemma [763 words)

Each stakeholder within this scenario face an ethical dilemma of some sort.
The client has the dilemma of deciding whether to go ahead with the bringing
forward of the release date of the product or to keep the initial deadline date.
This would be considered a commercial dilemma rather than ethical.

Borries manager has the dilemma on the way he approaches the meeting he
has with borries in regards to his holiday. He can either let Borries proceed
with his holiday or instruct/ask him to cancel. If he is to instruct borries to do
the job, then his manager is exercising his authority in order to get borries to
do the work. If this choice is taken then it can be seen as Egoism (Rand 1957)
as he is concerned with his self interests; and believes there is potential for
future contracts and he doesnt want to let this opportunity slip. Utilitarianism
could also be applied as he may be thinking what is good for everyone eg. A
promotion may be due for Borries and further contracts could become open
for the company.

Swee Lan faces a dilemma when she is asked by Borries what decision she
thinks he should make. If she says no to cancelling the holiday, this thought
process could be linked with Egoism as she is mainly focusing on her self
interest and hasnt considered the consequences borries going on holiday has
on his job. If she was to support borries and agrees to cancelling the holiday,
she would fit under virtue ethics as she is supporting the opinion of borries,
however this may jeopardize the relationship they have.

The dilemma facing Borries is whether to go on holiday or not. If he decides to

not go on holiday, Borries could be considered to be exhibiting utilitarianism
behaviour(Bentham, 1789) he is maximizing the welfare of those involved;
himself and the company. He also consulted his girlfriend before making the
decision and is thinking about the final outcome so could be seen as a
consequentialist where the ends justify the means (Mizzoni, 2009). If he
makes the decision to go on holiday, then according to (Rawls,1971) and his
theory of rights and justice he is simply just upholding principles and is

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commited to going to see his girlfriend and her family. He may feel that there
will be serious consequences for his relationship if borries was to decide not
to go on holiday,

Moral intensity (Jones 1991) moral intensity is a model that captures the
extent of issue-related moral imperative in a situation (jones 1991). The
magnitude of consequences in Borries dilemma could be considered to be
quite high because his dilemma could affect his colleagues, as well as the firm
he works for due to the fact that he could be setting a precedent which will
affect his colleagues in the future, and going on holiday could lead to a loss of
a lucrative contract which would affect the firm as a whole.
Social consensus could be considered medium as it is a US firm and society
could be split on the decision to either go on holiday or not and the
implications of doing so.
Probability of effect: the probability of the consequences happening could
be high due to the client needing the project completed as soon as possible to
avoid being outdone by their competition, if borries was to choose his holiday,
it is very likely that this will have consequences on the relationship of the firm
and the client.
Temporal Immediacy: There is medium temporal immediacy as
consequences may not happen straight away; the client may consider looking
for a new supplier in a few months, after it has evaluated the impact that
delaying the deadline had on its sales.
Proximity: this could be high as the decision will be affecting not only his
colleagues, but also his relationship with his girlfriend and her family.
Concentration of effect: This could be medium as the decision will affect
quite a few people; his colleagues, the client and his girlfriend.

Stakeholder Salience model (Figure 1) is an analysis model that can help a

manager identify stakeholders using three major attributes; power, legitimacy
and urgency.(Mitchell et al, 1997) Using this model Borries would be defined
as a definitive stakeholder He has power as he is a major influencer in terms
of the project. He is a employee of the company and has a good relationship

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with the client so is legitimate, and there is urgency as his decision to go on
holiday has potential to affect the project immediately.

Figure 1: Stakeholder Salience Model (Mitchell et al. 1997, p.873.)

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Appendix C: Interpersonal and team-working skills [344 words]

Throughout the module, discussions and debating with one another and
participating with the activities were vital in order to gain a better
understanding of the topics covered within the module. By doing this it helped
to further appreciate the impact that ethical issues can have in business. The
interpersonal skills that I have used in discussions and classroom work are;
verbal and non-verbal communication, listening, problem solving and
assertiveness

Verbal and non-verbal communication was used in order to get my opinions

across within the debate carried out in the seminar. These skills had an
overall affect on the outcome, as the way I said things and expressed my
feelings using body language further helped reiterate what was being said and
allowed people to gain a better understanding.
Listening was a key skill, as it was needed to be able to effectively
understand what was being communicated and showed to the speaker that I
was interested in what they were saying. By listening to other peoples views,
it improved my understanding of the ethical issues that were being discussed,
for example within the Borries dilemma, further points were raised that I
hadnt thought of.
Decision making skills was also needed within this module because
when meeting with the study group prior to seminar tasks, we all had different
opinions on what we thought would best suit our arguments, but we needed to
decide efficiently on what was most suitable. This influenced my
understanding of ethical issues further because those face with a dilemma
often have to make a decision quickly and effectively to gain the best results.
Team-working skills such as respect with one another was also used,
because by having this skill it allowed me to understand different opinions, as
there is no right or wrong answer within ethics if there is valid reasoning
behind it.

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Overall I feel like all the skills I have mentioned have increased my
understanding of ethical issues, because they have allowed me to appreciate
other peoples views within ethics that I may have thought to be wrong
previously.

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Kant,I. (1992). Groundwork for the metaphysics of morals (1785), translated

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Mitchell, R., Agle, B. and Wood, D. (1997). Toward a Theory of Stakeholder

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Retrieved from: https://business-
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