Chapter5 Ethicaldecisionmakingaug2018 180909102039

CHAPTER 5:
ETHICAL DECISION MAKING

TABLE OF CONTENT
 Summary
 A Framework for Ethical Decision Making in Business
 Using the Ethical Decision-Making Model to Improve Ethical
Decisions
 Normative Considerations in Ethical Decision Making
 Understanding Ethical Decision Making in Leadership
SUMMARY
 This chapter summarizes our current knowledge of ethical
decision making in business and provides a model so you may
better visualize the ethical decision making process.
 Although it is impossible to describe exactly how any one

individual or work group might make ethical decisions, we can
offer generalizations about average or typical behavior patterns
within organizations.
 These generalizations are based on many studies and at least

six ethical decision models that have been widely accepted by
academics and practitioners. Based on this research, we
present a model for understanding ethical decision making in
the context of business organizations.
SUMMARY
 The model integrates concepts from philosophy, psychology,
sociology, and organizational behavior.
 This framework should be helpful in understanding

organizational ethics and developing ethical programs.
 Additionally, we describe some normative considerations that

prescribe how organizational decision making should approach
ethical issues.
 Principles and values are used by organizations as a

foundation for establishing core values to provide enduring
beliefs about appropriate conduct.
 Therefore, we provide both a descriptive understanding of how

ethical decisions are made as well as the normative framework
to determine how decisions ought to be made.
A Framework for
Ethical Decision
Making in
Business
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Engineering Ethics and Difficult
Decision Making | Justine Metz |
TEDxCSM
A Framework for Ethical
Decision Making in Business
Ethical Issue Intensity
Individual Factors
Business Ethics
Ethical or unethical
Intentions, Behavior,
behavior
and Evaluation
Organizational
Factors
Opportunity
A Framework for Ethical
Decision Making in Business
 This model above of the ethical decision-making
process in business includes ethical issue intensity,
individual factors, and organizational factors, such as
corporate culture and opportunity.
 All of these interrelated factors influence the

evaluations of and intentions behind the decisions that
produce ethical or unethical behavior.
A Framework for Ethical Decision
Making in Business
 The first step in ethical decision
making is to recognize that an
ethical issue requires an
individual or work group to
choose among several actions
Individual Factors
that various stakeholders inside
Business Ethics
and Evaluation
behavior
or outside the firm will ultimately
Organizational Factors
evaluate as right or wrong.
 The intensity of an ethical issue
Opportunity
relates to its perceived
importance to the decision
maker.
Making in Business
 Ethical awareness is the ability to perceive whether
a situation or decision has an ethical dimension.
 Ethical issue intensity can be defined as the
relevance or importance of an event or decision in
the eyes of the individual, work group, and/or
organization.
Individual Factors  Individuals are subject to six “spheres of influence”
Business Ethics
and Evaluation
behavior when confronted with ethical choices—the
workplace, family, religion, legal system, community,
and profession—and the level of importance of each
Opportunity
of these influences will vary depending on how
important the decision maker perceives the issue to
be.
 Moral intensity relates to a person’s perception of
social pressure and the harm the decision will have
on others.
Making in Business
 People often base their
decisions regarding ethical
issues on their own values and
principles of right or wrong.
These values are subjective
and can vary across cultures.
Individual Factors
Business Ethics
and Evaluation
behavior
 Research on gender and
ethical decision making
Opportunity suggests that women are
generally more ethical than
males.
Making in Business
 Education and work experience are
both positively correlated with
making ethical decisions.
 Nationality is the legal relationship

between a person and the country in
which he/she is born. Culture
Individual Factors
differences may contribute to
Business Ethics
differing value systems.
behavior
and Evaluation
 Research on age and ethical
decision making reveals a
Opportunity
complicated relationship.
 Younger managers are far more

influenced by organizational culture
than are older managers.
Making in Business
 Locus of control relates to
individual differences in relation to a
generalized belief about how one is
affected by internal versus external
events or reinforcements.
Ethical Issue Intensity  Those who believe in external
control (externals) see
Individual Factors themselves as going with the flow
Business Ethics
Ethical or unethical because that is all they can do.
behavior
and Evaluation
Organizational Factors  Those who believe in internal
control (internals) believe that
Opportunity they control the events in their
lives by their own effort and skill
and trust in their capacity to
influence their environment.
Making in Business
 No one operates in a vacuum.
 In the workplace, the organization’s

values have the greatest influence
on decisions. The alignment between
a person’s own values and the
values of the organization help to
Individual Factors
create positive work attitudes and
Business Ethics
organizational outcomes.
behavior
and Evaluation
 A corporate culture can be defined
as a set of values, norms, and
Opportunity
artifacts, including ways of solving
problems that members (employees)
of an organization share.
Making in Business
 The ethical culture reflects
whether the firm also has an
ethical conscience.
 Ethical culture is a function of

many factors, including
corporate policies on ethics, top
Individual Factors
Business Ethics
management’s leadership on
and Evaluation
behavior
ethical issues, the influence of
coworkers, and the opportunity
Opportunity
for unethical behavior. The more
ethical a culture is perceived to
be, the less likely employees are
to make unethical decisions.
Making in Business
 Those who have influence in a
work group, including peers,
managers, coworkers, and
subordinates, are referred to as
significant others.
 Obedience to authority helps
Individual Factors
to explain why many employees
Business Ethics
resolve business ethics issues
and Evaluation
behavior
by simply following the directives
of a superior. In organizations
that emphasize respect for
Opportunity
superiors, employees may feel
that they are expected to carry
out all orders from a supervisor.
Making in Business
 Opportunity describes the
conditions in an organization
that limit or permit ethical or
unethical behavior.
 It results from conditions that

Individual Factors
Business Ethics
either provide rewards or fail to
behavior
and Evaluation
erect barriers against unethical
behavior.
Opportunity
Making in Business
 It also relates to individuals’
immediate job context—where
they work, with whom they work,
and the nature of the work.

 The opportunity that employees
have for unethical behavior in an
Individual Factors
organization can be greatly
Business Ethics
reduced through formal codes,
and Evaluation
behavior
policies, and rules that are
adequately enforced by
management. These
Opportunity
mechanisms for eliminating
misconduct must be consistent
and aggressive.
Making in Business
 An individual’s intentions and
the final decision regarding
what action he or she will take
are the last steps in the ethical
decision-making process.
Individual Factors
Business Ethics
 Guilt or uneasiness is the first
behavior
and Evaluation
sign that an unethical decision
has occurred. This feeling
Opportunity occurs when a person’s
behaviors are inconsistent with
ethical judgment.
Using the Ethical
Decision-Making
Model to Improve
Ethical Decisions
Using the Ethical Decision-Making
Model to Improve Ethical Decisions
 The ethical decision making
framework cannot tell you if a
business decision is ethical or
unethical, but it does provide
you with insights and
knowledge about typical
Individual Factors
Business Ethics
Ethical or unethical ethical decision making
behavior
and Evaluation
Organizational Factors processes in business
organizations.
Opportunity
 It is unlikely that an
organization’s ethical problems
will be solved through a
thorough knowledge about
how ethical decisions are
made.
Individual Factors
Business Ethics
and Evaluation
behavior  Business ethics involves
value judgments and
collective agreement about
Opportunity
acceptable patterns of
behavior.
 Ethical decision making within
an organization does not rely
strictly on the personal values
and morals of individuals.
Knowledge of moral
philosophies or values must be
balanced with business
Individual Factors
knowledge and understanding of
Business Ethics
the complexities of the dilemma
and Evaluation
behavior requiring a decision.
 Organizations take on a
Opportunity
culture of their own, which,
when combined with
corporate governance
mechanisms, have a
significant influence on
business ethics.
Normative
Considerations in
Ethical Decision
Making
Normative Considerations in
Ethical Decision Making
 Normative approaches concern how  Different from a descriptive approach
organizational decision makers should that examines how organizational
approach an issue. decision makers approach ethical
decision making.
 Concepts like fairness and justice are

highly important in a normative
structure.
 Most organizations develop a set of

core values to provide enduring beliefs
about appropriate conduct. Core values
are central to an organization and
provide direction for action.
 By incorporating stakeholder objectives

into corporate core values, companies
begin to view stakeholders as
significant.
 Institutions as the Foundation  Institutions are important in
for Normative Values establishing a foundation for
normative values.
 Organizations face certain

normative pressures from
different institutions to act a
certain way.
 These pressures can take
place internally (inside the
organization itself) and/or
externally (from the
government or other
institutions).
 Sort institutions into three
categories:
 Political,
 Economic, and Economic
 Social
Political Social
Important
Institutions
 Political influences can take
place within the organization.
 An ethical organization has
policies and rules in place to
Economic
determine appropriate
behavior.
Political Social  This is often the compliance
component of the firm’s
organizational culture.
Important
Institutions
 Failure to abide by these
rules results in disciplinary
action.
 Normative business ethics takes
into account the political realities
outside the legal realm in the
form of industry standards.
Economic  Legal issues such as price
fixing, antitrust issues, and
consumer protection are
important in maintaining a fair
Political Social and equitable marketplace.
 Because of their impact on the
economy, these issues must
Important be major considerations for
Institutions businesses when making
ethical decisions.
 Competition affects how a company
operates as well as the risks
employees take for the good of the
firm. The amount of competition in an
industry can be determined and
Economic described according to the following:
 Barriers to entry into the industry.
Political Social  Available substitutes for the
products produced by the industry
rivals.
 The power of the industry rivals
Important
Institutions over their customers.
 The power of the industry rivals’
suppliers over the industry rivals.
 Social institutions include
religion, education, and
individuals such as the family
 Laws meant to ensure an
Economic organization acts fairly, but
there is no law saying people
should do to others as they
would prefer to have done to
Political Social them.
 Many cultures adopted this
rule that has been
Important institutionalized into
Institutions businesses with standards on
competing fairly, being
transparent with consumers,
and treating employees with
respect.
 While industry shared values
promote organizational
effectiveness when linked to
goals, it can also hinder
Economic effectiveness if more efficient
means of organization and
structure are avoided in
Political Social exchange for stability.
 There is a risk that
organizations might sacrifice
Important new ideas or methodologies in
Institutions
order to be more acceptable.
 This can limit innovativeness
and productivity.
 When values from political,
economic, and social Values from
Political,
institutions are embedded into Economic and
Social
the organizational culture to Institutions
provide incentives for
appropriate behavior, firms
tend to act more socially Socially
responsible. Responsible
Organization
Embedded to
the
organizational
culture
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The social responsibility of business
| Alex Edmans |
TEDxLondonBusinessSchool
 Implementing Principles and  Political, economic, and social
Core Values in Ethical Decision institutions help organizations
Making determine principle and values
for appropriate conduct.
 Principles support the concept

of justice.
 Principles as basis for

companies to develop their core
values
 Leaders, stakeholders and

organizational culture impact the
development of core values
 Implementing Principles and External institutions help companies
determine their principle and values
Core Values in Ethical for appropriate conduct.
Decision Making
Concept of Principles support the
concept of justice.
Principles as basis for companies to

develop their core values
Three factors that impact the

Next, a video on
The importance of having core
values for your business
Implementing Principles and Core
Values in Ethical Decision Making
External institutions help companies
Economic
Concept of Principles support the institutions
concept of justice.
Political Social
institutions institutions
develop their core values Principles
and Values
of Good
Conduct
External institutions help companies  Political, economic, and social
institutions help organizations
determine principle and
values for appropriate
concept of justice. conduct.
 Principles and values are
important normative
Principles as basis for companies to considerations in ethical
decision making.

External institutions help companies  John Rawls (pic) was one of the most
determine their principle and values influential philosophers in his research
for appropriate conduct. on how principles support the concept
of justice.
Concept of Principles support the  Veil of ignorance is a thought
concept of justice. experiment that examined how
individuals would formulate
principles if they did not know what
their future position in society would
Principles as basis for companies to be.
 Identified principles that were not
biased by one’s social position.

Next, a video on
The Veil Of Ignorance
External institutions help companies  John Rawls (pic) has developed two main
determine their principle and values principles of justice:
for appropriate conduct.  The liberty principle, also known as the
equality principle, states that each person
Concept of Principles support the has basic rights that are compatible to the
concept of justice. basic liberties of others.
 The 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.

External institutions help companies  Companies take basic principles
determine their principle and values and translate them into core
for appropriate conduct. values.
 Core values provide the
Concept of Principles support the abstract ideals that are distinct
concept of justice. from individual values and
daily operational procedures.
 Value practices evolve and
are translated into normative
Principles as basis for companies to definitions of ethical or
develop their core values unethical.
 Individual and
organizational values can
Three factors that impact the differ significantly because of
development of core values ethical diversity among
individuals.
Next, a video on
The link between organizational
values and individual values
External institutions help companies
Concept of Principles support the Stakeholders

concept of justice.
Organizational
Leaders
Culture

Development
of core
values

External institutions help companies  Leaders, stakeholders, and the
determine their principle and values organizational culture impact the
for appropriate conduct. development of core values.
 A firm’s core values provide a
blueprint into the firm’s purpose as
well as how it views ethical
concept of justice.
decision making and prioritizes
stakeholders.
 Organizations that have ethics
Principles as basis for companies to programs based on a values
develop their core values orientation are found to make a
greater contribution than those
based simply on compliance, or
obeying laws and regulations.
Leaders, stakeholders and
organizational culture impact the
Understanding
Ethical Decision
Making in
Leadership
Understanding Ethical Decision
Making in Leadership
 Factors that result in business
ethics evaluations and
decision
Ethical issue Individual

intensity factors
Organizational
Opportunity
factors
 An ethical organizational
culture is shaped by effective
leadership. Without top level
support for ethical behavior,
the opportunity for employees
Ethical Ethical
to engage in their own Effective
organizational Decision by
Leadership
personal approach to ethical culture Employees
decision making will evolve.

Next, videos on
What makes 'ethical leadership'
effective?
Apple CEO Tim Cook on Ethical
Leadership
 The more you know about
ethical decision making in Belief in
business, the more likely you Ethical
Decision
will be to make good leading to
positive
decisions. outcome
Good Ethical
Decision
Correct
Knowledge
on ethical
decision
making in
business

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CHAPTER 5:

ETHICAL DECISION MAKING

 Although it is impossible to describe exactly how any one

 These generalizations are based on many studies and at least

 This framework should be helpful in understanding

 Additionally, we describe some normative considerations that

 Principles and values are used by organizations as a

 Therefore, we provide both a descriptive understanding of how

 All of these interrelated factors influence the

 Nationality is the legal relationship

 Younger managers are far more

 In the workplace, the organization’s

 Ethical culture is a function of

 It results from conditions that

Ethical Issue Intensity

 Concepts like fairness and justice are

 Most organizations develop a set of

 By incorporating stakeholder objectives

 Organizations face certain

 Principles support the concept

 Principles as basis for

 Leaders, stakeholders and

Principles as basis for companies to

Three factors that impact the

Three factors that impact the

Three factors that impact the

Three factors that impact the

Concept of Principles support the Stakeholders

Principles as basis for companies to

Three factors that impact the

Ethical issue Individual

decision making will evolve.

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