5
Ethical Decision Making
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Learning Outcomes
After reading this chapter, you should be able to do the following:
• Summarize traditional ethical theories in business terms and explain the value of understanding these
underlying influences in ethical decision making.
• Analyze individual factors that may influence ethical decision making in business.
• Employ an ethical decision-making framework for making ethical decisions in business.
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Introduction
Introduction
Relevance to Business
The senior managers of a defense contractor must attend the annual ethics training program.
Chris and Dave have been with the company for 10 years, and dread listening to top management discuss ethical issues and compliance requirements. The chief executive officer (CEO)
takes the stage and introduces Dr. Sherman, a professor of philosophy, as the facilitator for
the training. Dr. Sherman begins speaking about ethical theory and the philosophies of Aristotle, Kant, and John Stuart Mill. Chris and Dave look at each other and groan. As the most
outspoken of the company managers in the training, Chris asks Dr. Sherman, “All this is very
interesting, but how are these theories relevant to business?” Dr. Sherman ponders the question and smiles.
“Interesting point,” he responds. “Have you ever wondered why a coworker doesn’t agree with
what you would consider an obviously good business decision? Is that person just being stubborn or uncooperative? Think of times when you give clear directions for a task and workers
refuse to perform the task as requested. Are they insubordinate or just difficult employees?”
Chris and others nod in recognition of having these experiences.
Dr. Sherman continues, “You see, people come from different ethical perspectives that can contribute to organizational conflicts or employees disobeying directives. If a manager has a basic
understanding of ethical theories, he or she may be able to recognize when a coworker is looking at an issue from a different view than management. Perhaps the coworker is looking at the
issue from a fairness perspective, whereas you may be looking for the solution that satisfies the
most stakeholders. Instead of arguing, you may be able to guide him or her in making the right
decision for your company that takes multiple ethical perspectives into consideration.”
After the training, Chris agrees that learning about ethical theories may be beneficial; however, he is still not sure how to apply them. Chris says to Dave, “Everyone in my department
will think I’ve lost it if I start talking about egoism, utilitarianism, and ethics of care when
making a decision. There must be a better way to include ethical theories in business.”
It is common for managers to avoid framing a decision in ethical terms (Bird & Waters,
1989). Many consider ethics in business to be intuitive—knowing the right response without
conscious awareness (Faber, 1999; Haidt & Joseph, 2004). How many times has someone
referred to his or her “gut instinct” to determine a course of action? Consider a purchase
decision where a supplier is pressuring the sourcing team to choose its product by offering
extravagant trips and gifts. Intuitively, the sourcing team may feel that it is wrong to accept
the gifts. However, other personal factors may influence an ethical decision such as moral
philosophies, moral development, and social needs.
Moral philosophies derive from foundational ethical theories, which provide general guidelines that apply to any moral problem. Individuals use these ethical theories to evaluate right
from wrong. Derry and Green (1989) have identified over 60 ethical theories that offer similar, yet conflicting, solutions for ethical dilemmas. Individuals tend to subscribe to a dominant theory that they may not realize is influencing their moral choices. Yet some people may
feel that a moral philosophy justifies unacceptable behavior in the workplace. Therefore, it is
important for managers to understand the roles that ethical theory and moral development
have on workers’ ethical decision making.
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Section 5.1
Traditional Ethical Theories
This chapter explores the ethical decision making of individuals within organizations. The first
topic describes ethical theories in business terms, as three ethical traditions that guide individuals to determine if a decision is right or wrong. The second section explores the influence of
individual factors on ethical decision making in business, including the stages of moral development, social needs, and ethical decision-making styles. Finally, an ethical decision framework
incorporates the three ethical traditions to allow for reasoning of a business situation.
5.1 Traditional Ethical Theories
In business, ethical theories typically relate to three dimensions of ethical behavior (Wicks,
Freeman, Werhane, & Martin, 2010). The first relates to actions, focusing on what a company
or individual is doing. The next dimension considers the agent by focusing on who, or the
character of the company or person. The final dimension considers the outcome, focusing on
the consequences of a decision (see Figure 5.1 for the three ethical traditions relating to
behavioral dimensions). While one aspect may be more prevalent than another, a typical business decision incorporates all three ethical traditions.
Figure 5.1: Three ethical traditions relating to behavioral dimensions
In business, there tend to be three approaches to determining ethical behavior. These approaches focus
on the actions that are being done, the character of the company or person, and the consequences or
outcomes of the ethical decision. All three approaches are typically incorporated in a decision.
Actions
Rules and
Principles
Standards
of Conduct
Agent
Character
Outcome
Virtues
Consequences
Cost/Benefit
The three dimensions of a business decision relate to main traditions of moral philosophy
that reflect teleological or deontological ethics for answering the question, “What is the
right thing to do?” (de Colle & Werhane, 2008). Teleological derives from the Greek word
telos, meaning purpose or goal, and logos, referring to science or study. Under teleological
ethical theories, the rightness of a decision comes from being a good person (actor) and the
results (outcome). Deontology is the science or study of duty, deriving from the Greek word
deon. Deontological ethical theory determines the ethics of an action in relation to conformity
to rules or laws (“Deontological ethics,” 2014).
The three ethical traditions are complementary. Each approach reveals something different in
diagnosing an ethical problem and coming up with an ethical solution. Two of the traditions,
actions and outcomes, focus more on external aspects of the business decision while agents
focus on internal aspects. Actions relate to regulations imposed by authorities or industry
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Traditional Ethical Theories
Section 5.1
standards, whereas outcomes refer to the effect of the decision on company stakeholders.
The ethical tradition considering the character of the agent requires recognition of the company or individual values. Exploring the underlying moral philosophies of each ethical tradition allows managers to recognize their own ethical style and differences among the ethical
decision-making styles of their employees.
Actions
The ethical tradition that focuses on whether an action is acceptable is often the first step in
ethical decision making. People refer to standards that guide whether a behavior is good or
bad, or right or wrong. Ethical traditions focusing on action represent a deontological approach
to business ethics. For example, if an employee lies about being sick to cover for an absence, a
deontological approach would consider the action unethical as it violates a company policy or
business standard. An action-oriented ethical approach does not consider intent or outcome.
Other terms for action-oriented ethics include rules-based, principle-based, and Kantian. As
Chapter 4 stressed, laws and regulations impose a minimum standard of business actions.
However, other rules and principles influence ethical decision making within an organization.
Determinations of which behaviors are acceptable derive from religious and cultural traditions. Nearly every religion has principles of right or wrong, or their own version of the
Golden Rule of “Do unto others as you would have others do unto you” (Burton & Goldsby,
2005). Research in business ethics has shown that religious beliefs influence ethical behavior,
including the Ten Commandments of Judeo-Christians (Van Buren & Greenwood, 2013), the
rules for business and organizational conduct contained within the Qur’an and the Hadith of
Islam (Sloane-White, 2011), and the guidance of morals and rules of behavior in Hindu scriptures (Richardson, Sinha, & Yaapar, 2013). All companies should understand the religious
foundations of ethical behavior within diverse workforces.
Critics of deontological approaches to ethics find that decisions based on rules are too rigid,
too simplistic, or too reliant on vague principles (Smith & Dubbink, 2011). The main target of criticism is on the categorical imperative of the 18th century German philosopher
Immanuel Kant, who espoused unconditional or absolute moral philosophies. The categorical
imperative states, “Act only according to that maxim whereby you can, at the same time, will
that it should become a universal law” (Kant, 1785/1959, p. 39). For business, this means
that decisions must be suitable for all parties faced with the same dilemma. The challenge is
providing employees with the tools to interpret and apply universal ethical principles.
What are the standards that guide acceptable behavior in a business organization? A minimum
standard for ethical behavior is compliance with laws and regulations. The company can instill
a sense of duty by encouraging business decisions to be in accordance with the company mission. Formal company codes of conduct give guidelines for determining the type of behavior
that is acceptable within an organization. Industry or professional codes of conduct provide
employees with ethical standards for specific business activities. Organizational standards can
augment individual moral principles to encourage ethical behaviors in the workplace.
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Section 5.1
Traditional Ethical Theories
Agents
A branch of ethical thought focuses on the character of the agent (person or company) making
the decision. The premise of the ethical tradition is two-fold: 1) a belief that people of good
character act rightly and ethically, and 2) following rules is secondary to preserving relationships. What is good character? According to Aristotle, a person of good character develops
virtues such as fairness, trustworthiness, honesty, and humility that help identify the right
thing to do in any situation (de Colle & Werhane, 2008). Ethical virtues combined with practical wisdom lead to moral actions. Ethical philosophies that focus on the person and relationships are virtue ethics and ethics of care.
Virtue ethics consider the moral character of individuals in making good decisions and pull
from Aristotelian, Buddhist, and Confucian traditions (Provis, 2010; White & Taft, 2004). In
ethical decision making, a virtue ethical approach draws intuitively on an agent’s experience
and character. A good person chooses to acquire a virtue, whereas the alternative is a vice that
leads to corruption, fraud, and misconduct. Being a virtuous person entails living in moderation, according to Aristotle’s “Golden Mean” (see Table 5.1) or in Buddhism, the “Middle Way.”
An expression of every virtuous trait can be either too weak or too strong. For example, a
manager may be too honest or tactless by telling an employee, “Your work is sloppy and terrible.” However, if the same manager tells a low-performing employee that his or her work is
great, then the manager is being dishonest. The goal is to find the happy medium between the
two extremes. People tend to want to use the golden mean to assess correctness of an action;
however, the focus of virtue ethics is on the person. Remember to ask, “What would an honest
person do in this situation?”
Table 5.1: The golden mean of virtues
Action or Feeling
Deficiency
“Too Weak”
Mean
“Golden Mean”
Excess “Too Strong”
Fear
Cowardice
Courage
Rashness
Honor
Dishonesty
Honesty
Tactless
Pleasure and Pain
Empathy
Getting and Spending
Anger
Self-expression
Conversation
Social Conduct
Shame
Insensibility
Cold
Pettiness/Stinginess
Lack of spirit
Understatement/mock
modesty
Dullness
Surliness
Shamelessness
Temperance
Caring
Generosity
Patience/good temper
Truthfulness
Wittiness
Friendliness
Modesty
Self-indulgence
Smothering
Wastefulness
Irascibility (easily
provoked anger)
Boastfulness
Frivolous
Flattery
Shyness
Source: Aristotle. (1953). The ethics of Aristotle, translated by J.A.K. Thomson. England: Penguin Books. Adapted from Table of
Virtues and Vices, p. 104.
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Section 5.1
Traditional Ethical Theories
As with moral principles, a person’s virtues derive from religious and spiritual traditions. Dahlsgaard, Peterson, and Seligman (2005) identify six core virtues expressed explicitly or thematically in the world religions, which include courage, justice, humanity, temperance, wisdom, and
transcendence (see Table 5.2 for descriptions of each). Thomas Aquinas (1225–1274) describes
seven heavenly virtues and seven deadly sins that build on Greek philosophy. The virtues include
faith, hope, charity (love), fortitude (courage), justice, temperance, and prudence. The seven
deadly sins are pride (vanity), envy, gluttony, lust, anger (wrath), greed (avarice, covetousness),
and sloth. Confucianism encourages the virtues of patience, sincerity, obedience, and knowledge. Buddhism edifies compassion, forgiveness, honesty, generosity, and equanimity.
Table 5.2: Core virtues
Virtue
Description
Courage
Emotional strengths that involve the exercise of will to accomplish goals in
the face of opposition, external or internal; examples include bravery, perseverance, and authenticity (honesty)
Justice
Humanity
Temperance
Wisdom
Transcendence
Civic strengths that underlie healthy community life; examples include fairness, leadership, and citizenship or teamwork
Interpersonal strengths that involve tending and befriending others; examples include love and kindness
Strengths that protect against excess; examples include forgiveness, humility,
prudence, and self-control
Cognitive strengths that entail the acquisition and use of knowledge;
examples include creativity, curiosity, judgment, and perspective (providing
counsel to others)
Strengths that forge connections to the larger universe and thereby provide
meaning; examples include gratitude, hope, and spirituality
Source: Dahlsgaard, K., Peterson, C., & Seligman, M.E.P. (2005). Shared virtue: The convergence of valued human strengths across
culture and history. Review of General Psychology, 9(3), 203–213, p. 205.
The ethics of care is a theory encompassing social virtues that focuses on character traits
such as sympathy, compassion, and friendship (French & Weis, 2000). An ethics of care seeks
to discover how people “sustain fragile networks of relations that allow people to grow and
prosper, developing trust, respect, and responsibility for each other” (Gabriel, 2009, p. 383).
A benefit of the ethics of care is its flexibility in allowing for responsiveness to an ethical
dilemma. This theory can create a business environment emphasizing connection, cooperation, and the well-being of others. The attention that ethics of care has on maintaining relationships can alleviate tensions among stakeholders during a crisis (Linsley & Slack, 2013).
Consider how the trust that employees and shareholders have toward company management
encourages resilience during difficult economic times of declining sales.
A disadvantage of an ethics of care is that people with this orientation believe that tailoring
solutions to the situation is normal. They are unlikely to view rules as deterrents, instead
following a more instinctive method of determining if an action is correct. More women than
men adopt an ethics of care philosophy, yet it is not a feminist theory (Borgerson, 2007).
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Section 5.1
Managers with a caring orientation are sensitive to the consequences of a decision on individuals and consider consensus an important part of getting support from all participants.
The aim of virtue ethics and ethics of care is to become an improved person who is more
likely to make better decisions. Companies can develop managers and employees with good
character by creating a values-based ethics program with clear corporate values (Hartman,
1998). For example, the values-based ethics program of United Launch Alliance promotes
employees to base their behaviors on the organization’s core values (see Chapter 1). By stating its values, companies are able to attract employees with virtues that align with company
values. If a company encourages a virtue like honesty, then employees considering whether
to tell a client of delayed shipments would more likely be truthful.
Outcomes
The third ethical tradition focuses on the consequences of a decision or results-oriented ethics. The bases of teleological theories in this ethical tradition seek to do no harm by acting in
a manner that produces the best outcome. Often people adopting a results-oriented approach
will say, “The ends justify the means,” emphasizing not the how or who, but the outcome of an
action. Many results-oriented approaches center on the relationship between ethics and selfinterest of an individual or group. Others focus on the fairness of the outcome on stakeholders. Consequentialism includes ethical philosophies that presume that the value of an action
derives from the value of its outcomes, such as egoism, utilitarianism, and distributive justice.
An egoistic orientation centers on making a decision that provides for the greatest good for
oneself. Ethical egoism considers an action to be morally right when it maximizes one’s
self-interest (Shaver, 2010). The role of self-interest in business ethics links to some extent
to Adam Smith’s theory that society benefits when individuals act in their own self-interest
(James & Rassekh, 2000). Does this mean that a manager can make decisions based on what is
best for him or her regardless of harming others? Some interpretations of Adam Smith incorrectly suggest that self-interest is devoid of ethical considerations. The feeling among many
ethicists is that egoism is synonymous with selfishness and greed (Burnes & By, 2012).
In business, the influence of egoism on ethical decision making has two implications: employees need to be cognizant of self-interest to avoid taking undue advantage of situations while
harming others; and companies should have controls in place, where possible, to prevent
misconduct. Examples of unethical uses of egoism include a CEO selling company stock before
scandals become public or a salesperson pressuring a client for an order to make quotas and
increase commission. Second, the features of self-interest and self-preservation in egoism
can prevent misconduct when combined with principles of honesty and justice. For example,
consider a salesperson told to lie to a customer about product safety. Lying could harm the
customer and thereby harm the salesperson’s long-term sales. In this case, egoism can deter
misconduct by pointing out the harmful consequences of the actions (Woiceshyn, 2011).
Making decisions in the best interest of the individual can evolve into decisions that result
in the greatest good for the group. Tribalism refers to a predisposition to act in union with
others, including in-group cooperation and out-group competition (Tullberg, 2006). Creating
a culture where teams work together and protect the group’s viability within the firm can
contribute to high performance. Where tribalism creates problems in the workplace is when
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Section 5.1
groups become too competitive with other groups within the company. Consider departments
where a newcomer has a difficult time assimilating and is always considered an outsider or
newcomer. To overcome the negative effects of tribalism within Southwest Airlines Co., chairman Herb Kelleher prompted employees to work across groups, stating:
Our greatest advantage is our people and the unmatched customer service
and teamwork we bring to any challenge. But make no mistake about it. If we
fall into the trap of internal tribalism, with one station or city competing for
resources against another, or with the reservations team sparring with marketing, or any other of the many internal points of potential conflict, we will
lose our collective focus and can easily join the dozens of airlines no longer in
business. (As quoted in McGee-Cooper, 2005, p. 13)
Broadening beyond the individual or group, utilitarianism is the philosophy that an ethical decision provides the greatest good for the greatest number. Andrew Gustafson (2013)
describes utilitarianism as providing “a vision of ethical behavior that holds the common
interests of humanity as of utmost importance when making a moral decision” (p. 326). A
utilitarian approach relies on a cost/benefit analysis based on the principle of utility, or greatest happiness principle, which determines the rightness of acts (or rules of action) by their
effect on total happiness. Classical utilitarian ethical reasoning originates from British philosophers Jeremy Bentham (1748–1832) and John Stuart Mill (1806–1873). Bentham promoted
giving numerical values to various consequences of an action and mathematically assessing
whether the good outweighs the bad, a practice called utilitarian calculus.
David Koepsell (2010) promotes the use of a type of utilitarian calculus for scientists deciding
whether to disseminate potentially deadly or dangerous technologies. Consider breakthrough
research that would double the effectiveness of a nuclear bomb or the development of a virus
that resists all known treatments. What responsibility would the research scientist have if an
organization decided to use these innovative technologies to eradicate populations? Koepsell posits that scientists must consider the consequences of their research by assessing the
risks for catastrophic outcomes (R) against the likelihood of others discovering the technology (L) and the potential benefit from scientific investigations (P). When the sum of L + P is
greater than R, a scientist can make a utilitarian case for pursuing the research. The potential
good outweighs the risk. Managers of pharmaceutical and technology firms deal with similar
issues regularly, by determining whether a new product or service benefits a greater number
of people than those who could be harmed.
Ethicists have reservations of the utilitarian approach for making ethical decisions in business. Gustafson (2013) identifies five common criticisms in business ethics research for utilizing utilitarianism:
1. The Convenience Objection: utilitarianism undermines principles such as justice and
truth telling, which would make the keeping of contracts a matter of convenience at
best.
2. The Supererogatory Objection: utilitarianism leads to irrational and futile conclusions which are unworkable and untenable in the business place because it asks too
much of the decision makers.
3. The Majority-bias Objection: utilitarianism is biased against the minority viewpoint
and so is unnecessarily blind both to the dignity of individuals and to innovation
from dissenters.
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Traditional Ethical Theories
Section 5.1
4. The Motivation Objection: utilitarianism fails to provide moral motivation for this
social concern it requires.
5. The Calculation Objection: utilitarianism is flawed insofar as it cannot provide an
adequate calculus system to do the utilitarian calculus, leaving it impotent to assist in
making ethical business decisions. (p. 335)
Critics of utilitarianism stress the difficulty in determining the greatest good, as it requires a
quantification of pleasure and pain to determine the optimal alternative. Other criticisms consider that a utilitarian approach encourages outcomes that ignore justice principles and are
unfair to minority groups. Audi (2007) suggests that proponents of utilitarianism consider the
distribution of the outcomes among as many groups or individuals for the following reasons:
1.
2.
3.
4.
5.
People tend to resent unequal distributions (at least) of certain common kinds;
Resentment is either painful or tends to cause pain;
People tend to accept equal distributions;
This acceptance, if not pleasurable, at least tends to reduce pain; and
Wide distribution is desirable given a hedonic analogue of the declining marginal utility of money. (p. 603)
Distributive justice relates to the fairness of outcomes, such as the allocation of pay, dealer
sales area, and pricing in a multi-tiered distribution channel (Klein, 2008; Umphress, Ren,
Bingham, & Gogus, 2009). The approach emphasizes proportionate equality. A definition for
distributive justice in business is the obligation to distribute benefits and costs among all
affected by an action or policy. Consider a manager with two employees wanting the same
week for vacation. The manager uses a distributive justice approach when trying to organize vacation schedule requests so that employees have equal chances for getting their first
choices. Employees are more likely to describe a violation of distributive justice as unfair
rather than unjust (Dempsey, 1949).
A results-oriented ethics tradition requires stakeholder analysis to identify the outcomes of a
decision on each company stakeholder (Audi, 2007). Particularly in marketing decisions, the
harm on customers, suppliers, and the community should be a consideration (Ferrell & Ferrell, 2008; Smith, Palazzo, & Bhattacharya, 2010). In 2014, CVS Pharmacy, the largest pharmacy
chain in the United States, announced it was removing cigarettes and other tobacco products
from all 7,600 stores, amounting to a loss of $2 million in revenue (Herper, 2014). The decision
considered the company stakeholders and the potential harm or benefit of offering tobacco
products where customers sought health advice. Tobacco companies and smokers may experience negative effects from the decision, having to seek other outlets for tobacco products for
sale and purchase. According to Herper (2014), CVS works “closely with hospitals, doctors’
networks, and . . . Accountable Care Organizations” (p. 8). CVS expects that additional revenue
through a greater relationship with healthcare professionals and insurance providers will more
than compensate for lost tobacco sales. News coverage portrays CVS as an ethical business, with
much focus on the cost-benefit analysis of the decision (Martin & Esterl, 2014; Park, 2014).
What other ethical traditions contributed to the decision to eliminate tobacco sales? All three
types of ethical philosophies could guide CVS management in making the right decision. See
Consider: What Is Your Ethical Style? to discover which ethical tradition is most dominant for
you or your coworkers. In addition to ethical philosophies, other individual factors may influence ethical decision making, possibly impeding the company from taking bold and courageous actions reflective of a responsible business.
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Traditional Ethical Theories
Section 5.1
Consider: What Is Your Ethical Style?
Survey of Ethical Theoretic Aptitudes
Instructions: Each of the following statements can be completed in two ways. Think about
each alternative and circle the one that best represents your feelings.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
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A person’s actions should be described in terms of being
a. good or bad.
b. right or wrong.
When making an ethical decision, one should pay attention to
a. one’s conscience.
b. others’ needs, wants, and desires.
Solutions to ethical problems are usually
a. some shade of gray.
b. black and white.
It is of more value to societies to
a. follow stable traditions and maintain a distinctive identity.
b. be responsive and adapt to new conditions as the world changes.
When thinking through ethical problems, I prefer to
a. develop practical, workable alternatives.
b. make reasonable distinctions and clarifications.
When people disagree over ethical matters, I strive for
a. some point(s) of agreement.
b. workable compromises.
Uttering a falsehood is wrong because
a. depending on the results, it can lead to further problems.
b. it wouldn’t be right for anyone to lie.
Thinking of occupations, I would rather be a
a. wise judge, applying the law with fairness and impartiality.
b. benevolent legislator, seeking an improved life for all.
I would rather be known as a person who
a. has accomplished a lot and achieved much.
b. has integrity and is a person of principle.
The aim of science should be
a. to discover truth.
b. to solve existing problems.
Whether a person is a liar is
a. a matter of degree.
b. a question of kind.
A nation should pay more attention to its
a. heritage, its roots.
b. its future, its potential.
It is more important to be
a. happy.
b. worthy.
(continued)
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Individual Factors in Ethical Decision Making
Section 5.2
Consider: What Is Your Ethical Style? (continued)
14.
15.
Unethical behavior is best described as
a. a violation of a principle of law.
b. causing some degree of harm.
The purpose of government should be
a. to promote the best possible life for its citizens.
b. to secure justice and fair treatment.
How to Score this Test
Count the odd-numbered questions to which you responded A
Count the even-numbered questions to which you responded B
Add the two numbers together, and subtract 8 from the total
Scoring:
+7 +6 +5 “fully utilitarian”
+4 +3 +2 “moderate utilitarian”
+1 0 −1 “neutral”
−2 −3 −4 “moderate deontologist”
−5 −6 −7 “fully deontologist”
This diagnostic test has been used for many years in many settings, both in the academic world
and in the private and public sectors. It is designed to ascertain an individual’s inclination to
approach ethical issues from a deontological or a utilitarian perspective. There are no wrong
answers and no unethical scores. About 90% of respondents score in the +5 to −5 range.
Source: Reproduced from F. Neil Brady’s Ethical Managing: Rules and Results (1990); Macmillan Publishing Company, New York, New York: pages 211–213.
5.2 Individual Factors in Ethical Decision Making
People deal with ethical issues differently: some depend on the law, social norms, and relationships; some focus on self-interest for themselves or the group; and some seek universal principles that guide moral behavior. Ethical decision making is not easy. Evaluating and
choosing an ethical action requires moral reasoning, the process in which individuals define
whether an action is morally right. Even with seemingly clear guidelines for ethical conduct,
professionals can encounter situations where acting ethically is ambiguous or difficult. Consider a sports example:
You are a basketball referee in the final moments of a big game. The home
team is up by one point as the clock ticks away and the crowd begins to cheer.
Just then, an opposing player drives toward the net. A defender stops him. A
skirmish ensues—a push here, a shove there—and the ball is knocked loose.
Players are sprawled across the floor. What would you do? (Chapman, Gentile,
& Rosenfeld, 2011, para. 1)
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Individual Factors in Ethical Decision Making
Section 5.2
Most referees would do nothing, even if, according to the rules, a foul should be the correct
call. Why would someone do nothing when his or her profession obliges enforcement of rules?
With no conscious thought, the referees are making the moral decision to refrain from calling
certain fouls based on experience and individual social needs.
Gentile (2010a) explains why good people sometimes do not act in line with their ethical values by pulling from a taxonomy from Dees and Cramton (1991). To address why negotiators
may appear amoral, they introduce a “mutual trust perspective where moral obligations are
grounded in a sense of trust that others will abide by the same rules” (Dees & Cramton, 1991,
p. 135). The expectation that not all people will act ethically creates three decision-making
styles:
•
•
•
Idealists—people who act on their moral ideals, no matter what.
Pragmatists—people who attempt to act in the service of their own material welfare as well as upon their moral ideas.
Opportunists—people driven exclusively by their own material welfare.
According to the typology, idealists and opportunists are extreme positions. Opportunists seek
an advantage regardless of others’ moral behavior, whereas idealists behave according to moral
ideals regardless of the costs to themselves. According to the situation, most people can relate
to one extreme or the other. Consider a time when a coworker argued adamantly for acting
ethically. For some issues, maintaining an idealistic stance may be easy. Other times, the same
coworker could appear to be an opportunist in making a decision solely in self-interest on a
different issue. Gentile (2010a) found that business practitioners usually self-identify as pragmatists and act on moral values only if such behavior does not place themselves at a “systematic
disadvantage” (p. 109). Pragmatists will restrain from opportunistic behavior as long as they
trust others will behave appropriately.
How do these ethical decision styles relate to the basketball referee’s decision of not calling
the foul? Making the morally correct call so close to the end of the game could place the referee at a disadvantage should the players, coaches, and fans object. Gentile would consider
the basketball referee as taking a pragmatic approach to ethical decision making. The following sections explore the factors that influence ethical decision making, including the maturity
of moral reasoning, importance of social needs, and perception of ethical relativism.
Cognitive Development
Moral reasoning involves transforming values, beliefs, and principles into action. People
develop moral reasoning gradually, becoming more sophisticated at reasoning through ethical dilemmas over time. Kohlberg’s stages of moral development suggest that individuals
naturally progress through a series of definite and describable stages of moral reasoning
(Kohlberg & Hersh, 1977). He identifies three levels of moral development that relate to preconventional (self-centered), conventional (conformity), and postconventional (principled).
The progression through the levels involves six stages moving from a personal focus, social
focus, and a universal principled focus on justice and rights. Table 5.3 outlines the key points
for each stage of Kohlberg’s model.
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Section 5.2
Individual Factors in Ethical Decision Making
Table 5.3: Six stages of moral development according to Kohlberg
Stage
What Is Considered to Be Right
Level One—Preconventional (self-centered)
Stage 1: The punishment-and-obedience
orientation.
Stage 2: The instrumental-relativist orientation.
Sticking to rules to avoid physical punishment.
Obedience for its own sake.
Level Two—Conventional (conformity)
Following rules only when it is in one’s immediate
interest. Right is an equal exchange, a fair deal.
Stage 3: The interpersonal concordance or “good
boy–nice girl” orientation
Stereotyped “good” behavior. Living up to what is
expected by people close to you.
Stage 4: The “law and order” orientation.
Level Three—Postconventional (principled)
Stage 5: The social-contract and legalistic
orientation
Stage 6: The universal-ethical-principle orientation.
Fulfilling duties and obligations to which you have
agreed. Upholding laws except in extreme cases
where they conflict with fixed social duties. Contributing to the society, group.
Being aware that people hold a variety of values;
that rules are relative to the group. Upholding rules
because they are the social contract, emphasizing
that they may change. Upholding nonrelative values
and rights regardless of majority opinion.
Following self-chosen ethical principles. When
laws violate these principles, act in accord with
principles.
Source: Adapted from Kohlberg, L., & Hersh, R.H. (1977). Moral development: A review of the theory. Theory Into Practice, 16(2),
53–59; Trevino, L.K. (1986). Ethical decision making in organizations: A person-situation interactionist model. Academy of
Management Review, 11(3), 601–617.
Businesses recognize the role of the workforce’s moral development on ethical decision making in the workplace (Snell, 2000). At the first level, individuals recognize cultural rules of
right or wrong, but respond mainly to outside threats or opportunities. In business, employees in this level’s first stage of punishment-and-obedience orientation act in fear of punishment for not complying with imposed rules, codes, and commands of management. However,
individuals in the second stage engage in actions that satisfy their own needs. In business,
employees in the second stage of moral development may follow, bend, or break the company
rules according to self-interest.
The second level of moral development stresses conformity to socially defined standards and
maintaining the expectations of the individual’s family, group, or nation. In business, employees
at this level are loyal to their profession or organization and protect the rules of each institution.
Employees look for approval in stage three of this level, and strive to appear helpful and trustworthy to coworkers and management. Those workers in the fourth cognitive development
stage respect the rules and codes of the organization and expect the same from management.
The final two stages of moral development represent what Kohlberg defines as a postconventional, autonomous, and principled level. Individuals at this level look beyond the group to define
and act on personal moral values and principles that promote well-being for society. Employees
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Section 5.2
in the fifth stage, the social contract orientation, focus on stewardship, social responsibility, and
concern for just treatment. They respect the moral rights of other groups and seek to reduce the
organization’s negative impact on social and environmental concerns. Employees in the final
stage of moral development have self-chosen ethical principles that guide behaviors relating to
justice, human rights, and respect for the dignity of human beings as individuals. Business organizations should encourage principled ethical reasoning, but should ensure that management’s
principles align with organizational principles. Employees at this stage are more likely to be
inquisitive of moral traditions in the organization, questioning the ethics of practices such as the
use of child labor or inadequate waste disposal. Companies should be open to critical discussion
and willing to implement new policies as warranted.
How can individuals within an organization tell where they or their coworkers are in the
stages of moral development? See Reputation Best: Bill Daniels’s Principle-Based Ethics for an
example of a business leader demonstrating principled moral reasoning. Scholars in the social
sciences use scenarios primarily to assess the predominant stage for students and employees.
Their findings shed insight on the antecedents, progression, and outcomes of moral cognitive
development for most individuals:
•
•
•
•
•
•
People are generally consistent in their level of moral judgment that reflects one
dominant stage, although may occasionally be at one stage lower or higher than
their dominant stage.
Progression to higher stages occurs quickly upon exposure to an environment that
stimulates reasoning at a higher level, such as organizations with an ethical climate
and training in ethical reasoning (Weber & Green, 1991; Weber & Wasieleski, 2013).
Under all conditions except extreme trauma, movement between stages is always
forward, never skipping stages.
People tend to function at the highest stage of moral development attained, while
maintaining an understanding of the lower stages.
Females may achieve higher stages of moral reasoning than males based on some
studies, whereas others find no significant difference between the genders (Kracher
& Marble, 2008; Nguyen, Basuray, Smith, Kopka, & McCulloh, 2008).
Ethical decision making and intended ethical behavior generally increase as individuals reach higher stages of moral reasoning (Weber & Green, 1991).
Business Best: Bill Daniels’s Principle-Based Ethics
Bill Daniels was a business leader who followed his principles and values throughout his
career. Most know of Bill Daniels as a pioneer in cable television, starting with his first cable
business in Casper, Wyoming in 1953. Bill went on to own and operate hundreds of cable
TV systems across the country. He founded Daniels & Associates, a nationally recognized
provider of investment banking services to media and technology companies. His leadership
helped bring numerous high-tech and communications companies to Colorado.
Bill attributed adoption of ethical principles to his experiences with sports coaches while
attending high school at the New Mexico Military Institute. He strove to build a reputation of
integrity. The following story demonstrates Bill’s principle-based moral reasoning in action.
(continued)
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Section 5.2
Business Best: Bill Daniels’s Principle-Based Ethics
(continued)
In 1952, Bill opened a small insurance agency in Casper, Wyoming, and
struggled to make it over the next three years. Then in 1955, one of the
insurance companies he represented went broke, leaving the policyholders high and dry. Bill stepped in for his client, feeling that he had
represented the terms and his integrity was at stake. As he explained:
“Two weeks after the bankruptcy, Burlington Railroad sued one of my
clients—to whom I had sold a liability policy—for $12,500. A judgment was entered against my client for $11,000. I made a deal with
Burlington Railroad to pay this judgment off at $500 per month, over
a 22-month period. I did not have to do this, but I had a strong conviction that I owed this to my insured who had placed his faith in my handling of his insurance business. During this time, the $500 payment
was more than I was making per month. I managed, however, through
borrowing and juggling of finances, to do this.” (The Life & Legacy of
Bill Daniels, 2012, p. 118)
Questions to Consider
1.
2.
3.
From the story of the insurance company, which ethical tradition best describes
Bill’s decision to pay the client from his own funds? Did he approach the decision
using a rules-based, virtue or relationship-based, or outcome-based approach, or a
combination of approaches?
Bill credits sports coaches for progression to higher stages of moral development.
What other factors could motivate someone to develop higher levels of moral
reasoning?
Can you think of a person who demonstrates principle-based ethics? How do his or
her actions reflect a highly developed moral reasoning?
Whereas rules and values may vary across cultures, the nature of moral reasoning is universal as a developmental sequence (Kohlberg & Hersh, 1977). This is good news for companies
struggling with diverse cultural values of their workforce. A well-designed ethics and compliance program will address the needs of workers at all stages of ethical reasoning, balancing
rules and punishment with policies encouraging loyalty and the well-being of all stakeholders
(Trevino, Weaver, Gibson, & Toffler, 1999; Weaver, 2001). Companies may introduce training
to develop the capability of employees to progress toward principle-based reasoning. Managers who understand how individuals engage in moral reasoning will be more effective in
encouraging ethical behavior in their workforce.
Social Needs
Identifying the motivators of employees can further management’s efforts to encourage ethical decision making. Consider a situation where James, the manager of a small office, publicly
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Section 5.2
Individual Factors in Ethical Decision Making
recognized Edith, an employee who reported a coworker for stealing from petty cash, which
resulted in that coworker’s termination of employment. To reward Edith, James called an
employee meeting to announce her ethical behavior and present her with a large monetary
award. Rather than gladly accepting the reward, Edith became crestfallen and embarrassed.
What James did not realize is that Edith’s motivation to do the right thing was in direct conflict with her social need to be a team player, not wanting to stand out as a whistle-blower on
her coworkers.
There are three social needs that may motivate an individual in an ethical decision-making
situation—achievement, affiliation, and power. A need for achievement relates to an individual’s motivation to exceed performance. The need for affiliation refers to an individual’s
inclination to work with others in the organization. The social need for power involves the
desire to control and influence others. Harvard professor David McClelland (1961) linked an
individual’s drive for achievement, affiliation, and power to workplace behaviors that can be
beneficial to organizational success, yet can also lead to unethical behaviors (Spreier, Fontaine, & Malloy, 2006). Table 5.4 provides an overview of the three social needs and potential
influences on ethical decision making. Individuals with a high achievement need tend to focus
on results, whereas a high affiliation need stresses relationships. McClelland recognized that
power can be personalized—using power for self-gain, or socialized—using power to assist
others (McClelland, 1961).
Table 5.4: Influence of social needs on ethical decision making
Social Need
Achievement
Affiliation
Power
Characteristics
Improves personal
performance
Prefers well-defined
goals
Seeks performance
feedback
Self-confident
Prefers working with
others
Maintains close,
friendly relationships
Fear of rejection
Promotes ethical
decisions
Thinks of long-term
impact on advancement
Takes carefully calculated risks
Assumes personal
responsibility for
performance
Innovativeness
Encourages
cooperation
More likely to be fair,
altruistic, friendly, generous, caring, and kind
to others
Influences and controls
others
Seeks positions of
authority
Seeks prestige objects
Influences and controls
others
Seeks positions of
authority
Seeks prestige objects
Impedes ethical
decisions
Cuts corners
Focuses on goals and
outcomes rather than
people
Avoids sharing bad
news
Goes along with the
group; conformity
Gives help, advice or
support to others
Is coercive or ruthless
Acts to enhance visibility and self-interest
Source: Adapted from (Langan-Fox & Grant, 2007; McCleland, 1961; Spreier et al., 2006.
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Individual Factors in Ethical Decision Making
Section 5.2
The strength of social motivations varies by national culture. People develop needs for
achievement, affiliation, and power through their culture and life experiences. Van Emmerik,
Gardner, Wendt, and Fischer (2010) have found a strong relationship among national cultural dimensions of performance orientation, human orientation, and power distance with
the respective social needs for achievement, affiliation, and power of 17,538 managers from
24 countries. They encouraged global employers to seek workers whose social needs are
compatible with the organization’s work environment. For example, employees motivated by
achievement thrive on challenging projects and rewards based on merit instead of seniority.
Li and Murphy (2012) explored whether a higher achievement need influences sales force
engagement in unethical sales practices. They surveyed 948 business-to-business salespeople of a multinational company’s sales force in Canada, Mexico, and the United States to
identify factors for activities such as getting customers to make forward purchases, overemphasizing contest-targeted products, making occasional exaggerated claims of targeted offerings, setting aside other responsibilities, accepting credit risks, and reducing helping and
sharing among salespeople. Their sample of salespeople with high achievement need in the
United States and Mexico were more likely to engage in all unethical sales behavior than colleagues with lower achievement need. However, the study showed that in Canada the level of
achievement need does not influence unethical behaviors of salespeople. An examination of
the social needs within a workforce may lead managers to identify potential areas of conflict
and address diverse reactions to a situation.
Ethical Relativism
Some individuals resist making ethical decisions using universal principles because of a belief
that more than one truth exists for some moral issues (Tännsjö, 2007). Moral relativism refers
to an expectation that ethical choices can vary based on class, race, gender, age, religion, culture of origin, or situation. Individuals with high relativism feel that one cannot make claims
of right or wrong. On the other extreme, individuals may adopt moral idealism, expecting
that the right action is attainable in all situations.
Forsyth (1980) examined how relativism and idealism influence ethical perspectives of individuals by developing a 20-item ethical position questionnaire. Ten of the items refer to idealism, with question such as: a) “The existence of potential harm to others is always wrong,
irrespective of the benefits to be gained”; and b) “One should never psychologically or physically harm another person.” Questions relating to relativism include: a) “What is ethical varies from one situation and society to another,” and b) “Moral standards should be seen as
being individualistic; what one person considers being moral may be judged to be immoral
by another person” (p. 178). Four ethical positions emerged from the 1980 study and subsequent research (Forsyth, 1981, 1992; Forsyth & Pope, 1984). The four positions are:
1. Exceptionism (low relativism, low idealism): Individuals’ actions should be consistent with moral rules, but pragmatism should allow exceptions to such rules.
2. Absolutism (low relativism, high idealism): Individuals’ actions are always consistent with moral rules because such actions produce the best consequences for the
most people.
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Section 5.2
Individual Factors in Ethical Decision Making
3. Subjectivism (high relativism, low idealism): Personal values guide their moral decisions; any other consideration, such as universal moral principles, is irrelevant.
4. Situationism (high relativism, high idealism): Individuals choose actions that produce
the best possible effects for all people concerned, regardless of deviating from rules
or moral norms.
To examine the cultural influences on relativism and idealism, Forsyth, O’Boyle, and McDaniel
(2008) analyzed results from 139 studies with over 30,000 respondents from 29 different
countries. Table 5.5 summarizes the dominant ethical position by country included in the
study. Most of the developed nations in the study have exceptionist ethical positions, with low
idealism and low relativism, while Britain and parts of the United States have the extreme
position with high idealism and high relativism. The Middle East and Asian countries vary
substantially among highly idealistic positions of situationism and absolutism. Only Asian
countries fall into the high relativistic subjective position. Two countries in the study straddle
ethical positions: Ireland is highly relativistic, yet neutral in idealism, while Ukraine is highly
idealistic, yet neutral in relativism. The findings highlight variances of idealism and relativism across regions of the world that align with Hofstede’s (1983) cultural dimensions such as
individualism and avoidance of uncertainty.
Table 5.5: Locations of nations on the two dimensions of idealism and relativism
High Idealism
Low Idealism
High Relativism
Low Relativism
Situationism
Britain
Brunei
India
Lebanon
Malaysia
Spain
Turkey
United Arab Emirates (UAE)
Western United States
Absolutism
Egypt
Korea
Poland
Saudi Arabia
South Africa
Subjectivism
China
Hong Kong
Japan
Thailand
Source: Summary of study done by Forsyth, O’Boyle, and McDaniel (2008).
Exceptionism
Australia
Austria
Belgium
Canada
East/Central United States
Israel
New Zealand
Russia
Ethical decision making is complex, incorporating ethical traditions, moral development,
social needs, and relativistic considerations (Craft, 2013). Cultural differences influence
moral philosophies and ethical positions, increasing potential for conflicts within a global
organization. Many individuals are unaware of the factors influencing their moral actions.
Making an ethical decision requires a process that incorporates multiple ethical approaches
(Treviño, 1986; Wicks et al., 2010; Woiceshyn, 2011).
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Section 5.3
Making an Ethical Decision
5.3 Making an Ethical Decision
Ethical dilemmas occur when a situation requires one to choose among alternatives that create a values conflict among stakeholders. By definition, a dilemma is a problem involving a
difficult choice among two or more equally conclusive alternatives (“Dilemma,” 2014). There
may not be a correct answer to an ethical dilemma. An ethical decision-making model is
a resource or tool that facilitates the ethical analysis of an action or a decision in an orderly,
systematic manner (Kotalik et al., 2014).
Many ethical decision-making models provide a sequence of steps that include gathering more
information, identifying alternatives, applying ethical filters, choosing an optimal option, and
implementation (Baird, 2012; Hartman & DesJardins, 2008). Models vary in the number of
steps to reason through an ethical dilemma, from five or six overview steps to detailed 10- or
12-step processes (Larimer, 2009; Pekel & Wallace, 2006). Most models provide a checklist or
framework to analyze the alternatives. Some models focus more on application of moral philosophies rather than ethical decision making within an organizational context (Audi, 2009;
Murphy, Laczniak, Bowie, & Klein, 2005). The Ethics Resource Center (2009a) encourages
companies to adopt an ethical filter with a strong focus on the organization in a six-step “PLUS
Decision Making Model.” The cue word PLUS references:
P = Policies: Is it consistent with my organization’s policies, procedures, and guidelines?
L = Legal: Is it acceptable under the applicable laws and regulations?
U = Universal: Does it conform to the universal principles/values my organization has
adopted?
S = Self: Does it satisfy my personal definition of right, good, and fair? (Ethics Resource
Center, 2009a, para. 5)
An ethical decision-making model should allow for analysis of ethical issues in routine business situations that all workers may readily apply. See Consider: Ethical Decision-Making Steps
for a five-step process for choosing actions that take into consideration individual and organizational ethical frameworks.
Consider: Ethical Decision-Making Steps
Step 1: Identify the Issue
a.
c.
d.
e.
What are the key facts in this situation?
1) What do you know for sure?
2) What is not known?
What are the personal values of the decision maker and the organization’s values?
What ethical principles are most relevant to this situation?
What are the rules or laws relevant to this situation?
a.
b.
c.
List the major stakeholders that have a stake in the outcome of the situation.
What does each stakeholder value?
What are the desired outcomes of this situation for each stakeholder?
(continued)
Step 2: Identify the Stakeholders
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Making an Ethical Decision
Section 5.3
Consider: Ethical Decision-Making Steps (continued)
Step 3: Analyze Alternatives
a.
b.
c.
Brainstorm possible alternatives for this situation.
Determine the possible consequences of each alternative for the key stakeholders.
Assess each alternative on actions, actor, and outcome perspectives.
a.
b.
What decision or action is consistent with principles, values, and has the best outcome?
What are possible repercussions from the action?
a.
b.
Will your recommendation stand the test of time?
Is your recommendation a model of “right” behavior?
Step 4: Take Action
Step 5: Monitor Outcome
Each step of the model involves further reflection to 1) identify the issue, 2) identify the stakeholders, 3) analyze alternatives, 4) take action, and 5) monitor outcomes. For an example of
how to apply the ethical decision model, consider a scenario where an employee presents
data to his or her manager regarding a fatal reaction that a small percentage of children with
allergies to a plastic component could experience because of a toy’s formulation change. The
manager can handle this situation in various ways, requiring an ethical analysis.
Step 1: Identify the Issue
The initial step in an ethical decision-making process is to clarify the issue and identify the
ethical nature of the situation. The characterization of the problem can influence the scope
of ethical analysis an individual undertakes. Pressures of the workplace may prompt quick
action rather than allowing for time to examine the ethical aspects of decisions (Akrivou,
Bourantas, Mo, & Papalois, 2011). Therefore, ethical decisions require knowledge about the
context and extent of an ethical dilemma, including probing questions on the key facts of the
situation, the values relating to the situation, and ethical principles or legal obligations influencing potential actions.
A difficult part of making the best decision can be delineating what information is known
and proven, what information may be rumored or inexact, and what information is missing.
In the toy scenario, the data that the employee presents needs verification before the best
response can be determined. What is the data based on? Are there other sources of similar
studies to verify the results from the data? Is the employee presenting the data trustworthy?
The manager should be cognizant of any personal biases that may negate or confirm the data
(Prentice, 2007).
Consider how the situation aligns or conflicts with the personal values of the person making
the decision and the organization’s values. Would deaths from product use align with personal values to respect human life? What are the organizational values that apply to a product
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Making an Ethical Decision
Section 5.3
safety issue? Many companies express a value for providing safe and quality products to consumers. For example, Nestlé has a core principle that “Everywhere in the world, the Nestlé
name represents a promise to the consumer that the product is safe and of high standard”
(Nestlé, 2012, p. 10). Knowledge of personal and organizational values enables identification
of the ethical aspects of a decision. Roy Disney said, “When your values are clear, making decisions becomes easier” (Maddock, 2014, p. 2).
Which personal or organizational ethical principles are most relevant to this situation? As
with values, many companies provide guides for ethical behavior through formal principles
or codes of ethics. Principles can relate to equity, liberty, and distributive justice. Equity principles refer to treating people fairly, engaging in fair competition, and creating just relationships. Liberty principles refer to safeguarding a person’s rights. Distributive justice refers to
the fair allocation of resources among societal stakeholders (Ferrell & Ferrell, 2008). Taking
these three perspectives into consideration, the following ethical principles can guide individuals and organizations in making the right decision:
1.
2.
3.
4.
5.
6.
7.
8.
Integrity: Act with honesty in all situations.
Trust: Build trust in all stakeholder relationships.
Accountability: Accept responsibility for all decisions.
Transparency: Maintain open and truthful communications.
Fairness: Engage in fair competition and create equitable and just relationships.
Respect: Honor the rights, freedoms, views, and property of others.
Rule of Law: Comply with the spirit and intent of laws and regulations.
Viability: Create long-term value for all relevant stakeholders. (The Life & Legacy of
Bill Daniels, 2012)
Does the dilemma conflict with any of these ethical principles? Consider the trust the customer places in the company to provide safe and effective products. Is there a legal or regulatory concern if the company ignores knowledge of a potentially dangerous product feature?
The ethical principle relating to rule of law stresses compliance with the spirit and intent of
regulations. Sometimes, the legal requirements are ambiguous or a situation may not have a
direct application. An ethical decision may be to adopt voluntary guidelines to protect consumers, rather than use laws and regulations as a justification for not taking action (Drumwright & Murphy, 2004). Since there are conflicts with company values and principles, choosing the most ethical alternative requires further analysis.
Step 2: Identify the Stakeholders
This step in ethical decision making involves the processes introduced in Chapter 2 for identifying company stakeholders and their concerns about the safety of products, the well-being
of employees, the transparency of company reports, and the social or environmental impact
of corporate activities. Therefore, the toy manufacturer manager should consider any group
or individual who can affect, or is affected by the organization’s marketing of a potentially
hazardous product. What are the stakeholder groups that require the most attention? What
does each stakeholder group value? What concerns would each stakeholder group have for
the situation? What outcome is most desirable for each stakeholder group?
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Section 5.3
Making an Ethical Decision
Some ethical decisions involve a small group of stakeholders, making this step easy if the decision maker has an accurate knowledge of stakeholder values and concerns. Other decisions
may require a formal stakeholder analysis to ensure inclusion of all stakeholder groups. Messick and Bazerman (1996) caution decision makers against the tendency to limit the search
for stakeholders. They performed an ethical analysis using an example of a product that could
harm a small group of consumers: a synthetic drug prescribed for women with problem pregnancies. Messick and Bazerman (1996) relate how the company failed to recognize that the
impact of the drug reached beyond the visible stakeholder—the women who consumed the
drug—and had devastating health effects on the women’s daughters. Table 5.6 illustrates an
example of the stakeholders to consider for the toy safety ethical scenario. Are there stakeholder groups that are missing from this analysis?
Table 5.6: Sample stakeholder analysis
Key Stakeholder
What Is Valued
Desired Outcome
Customers
Children’s safety
Truthful advertising
Immediate communication on health
risks of products
Replacement product or refund
Safe products
Transparent communication to
consumers
Removal of harmful products
Employees
Regulators
Shareholders
Business continuity and success
Reputable workplace
Business strategy and continuity
Risk and reputation management
Financial performance
Minimal disruption of business
Pride in workplace
Reduce or minimize legal and fiscal
risk
Maintain reputation
Through a stakeholder analysis, the desired outcomes of each stakeholder group outline some
considerations for addressing the ethical dilemma. As with the first step, the breadth and depth
of the stakeholder analysis influences the scope of the ethical analysis. Careful attention to this
step can avoid biases of limiting stakeholders or misinterpreting stakeholder concerns. The
next step involves identifying and analyzing alternatives by the three ethical traditions.
Step 3: Analyze Alternatives
An ethical dilemma requires the identification and assessment of possible alternatives. Brainstorming is one approach to identify alternatives for a situation. When employing this process, it is important to remain open to new alternatives and avoid the obvious or past solutions to a dilemma. The Ethics Resource Center (2009a) recommends that the decision maker
consider at least three alternatives, but preferably more than five, to avoid limiting choices to
two opposing choices. For example, for the toy safety scenario, alternatives could range from
doing nothing to stopping production with a worldwide recall of products. Listing all possible
solutions may generate groupings of common or complementary actions. Table 5.7 provides
an example of an alternative analysis for consideration. Envision additional alternatives or
combinations of alternatives for this situation. Note that the sample table only includes viable
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Section 5.3
Making an Ethical Decision
alternatives, or those options that the individual or company has the capability to implement.
For example, an option to cure the allergy causing the adverse reaction would not be a practical solution for the toy company.
Table 5.7: Sample alternative analysis
Action
Laws and standards
upheld or ignored
Character
Values displayed
(ethical principles)
Outcome
Avoids harm to stakeholders
& financial viability
Notify consumers
of hazard (hazardous material label
on product)
Complies with letter of
CPSA regulations
Impedes on company
value of delivering safe
and quality products;
supports transparency;
conflicts with spirit and
intent of law; conflicts
with accountability
Recall all product
from customers
and retailers
Complies with spirit
and intent of CPSA
regulations
Follows company value
of delivering safe and
quality products; supports trust, accountability, rule of law, and
transparency
Customers: positive and
negative outcomes; informs
them of risk; puts burden of
safe use on customer
Shareholders: positive and
negative outcomes; low cost
to implement, but could suffer financial or reputational
loss if customer sues over
death/harm to child
Stop all production, reformulate
product
Complies with spirit
and intent of CPSA
Follows company value
of delivering safe and
quality products; supports trust, accountability, rule of law, and
transparency
Viable Alternative
Do nothing
Violates Consumer
Product Safety Act
(CPSA); against company
policy of following up on
allegations/reports
Against company
value of delivering safe
and quality products;
conflicts with trust,
integrity, transparency,
and accountability
Customers: negative outcome; risk of death or harm
Shareholders: negative outcome; increases risk of legal
action by consumers and
regulatory agencies
Customers: positive outcome; avoids risk of
death/harm
Shareholders: positive and
negative outcomes; benefit
from reputational gains, but
suffer financial losses due to
cost of recall
Customers: positive outcome; avoid risk of child’s
death/harm
Employees: negative
outcome; may experience lay-offs or reduced
profit-sharing
Shareholders: positive and
negative outcomes; benefit
from reputational gains, but
suffer financial losses from
reduced sales and greater
research and development
expense
The next step is an analysis of each alternative using the three ethical traditions of organizational and mandatory rules (action), character of the individual or organization (actor),
and consequences to stakeholders and the organization (outcome). This assessment requires
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Section 5.3
knowledge of the company policies and mandated legal requirements relating to the situation. If the company sells in the United States, knowledge of a potentially harmful product
would fall under the Consumer Product Safety Act (CPSA). The CPSA stipulates that a manufacturer, importer, distributor, and retailer of consumer products immediately notify the Consumer Product Safety Commission if it “obtains information which reasonably supports the
conclusion that a product distributed in commerce fails to comply with an applicable consumer product safety rule or with a voluntary consumer product safety standard” (Office of
Compliance and Field Operations, 2012, p. 6). Other countries may have similar statutes or
regulatory requirements.
The sample assessments of alternatives in Table 5.7 illustrate how using only one ethical tradition could bias selection of the optimal solution. For example, multiple alternatives meet the
legal requirements for an ethical solution. Differentiations among those alternatives emerge
when including character alignment and consequences to company stakeholders. Note that
an ethical analysis may not provide a solution that avoids harm of all stakeholders. Johnson
(2009) relates that even after careful definition and analysis of an ethical issue, decision makers can reach and defend different conclusions. Choosing the ethical alternative is the next
step of the ethical decision-making model.
Step 4: Take Action
How can one decide which of the possible actions is the most ethical? According to Narvaez
and Rest (1995), moral judgment is the process an individual undertakes to weigh choices
and determine which should be implemented. Upon identification of possible actions, moral
judgment entails deciding which action is right and which options are wrong. Narvaez and
Rest stress that while moral judgment is rooted in an individual’s value system, education and
experience strengthens a person’s moral judgment over time.
In their 10-step ethical decision-making model, Pekel and Wallace (2006) provide a practical tool for determining the most viable alternative to implement. To become the preferred
viable option, the alternative must meet three criteria: 1) it “prevents or minimizes harm to
the major stakeholders”; 2) it “upholds the . . . values and ethical principles” of the individuals
and organizations; and 3) it “is a good, workable solution to the situation that can actually be
implemented” (p. 9). Note that Pekel and Wallace prioritize the alternatives on least amount
of harm to stakeholders and alignment with the character of the entity. Their criteria does not
preclude adherence to policies and laws, but as Drumwright and Murphy (2004) state, “The
law is often a ‘blunt tool’—a cumbersome and often inefficient method with which to deal
with ethical issues” (p. 12). Therefore, while laws and policies should be the minimum consideration, business leaders should exercise caution when thinking that legal means ethical.
Decision makers can reassess the chosen alternative prior to taking action through a series of
questions. They could ask:
•
•
•
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What would a reasonable person think about this decision?
Can you easily explain what makes the decision ethical?
What if my decision was made public? Or appeared in the newspaper?
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A tactic promoted by Pekel and Wallace (2006) is to identify the worst possible repercussion of
taking the chosen action. By describing a worst case scenario from implementing the preferred
alternative, modifications to the solution may eliminate risks of unintended consequences of a
seemingly ethical decision. Consider the worst case scenario if the toy manager chose to implement a warning label on the toys since the potential for an allergic reaction affected only a small
percentage of consumers. The worst case could be that children using toys missing the label die
from exposure to the plastic. An investigation of the cause could result in class action lawsuits
and damage to the company’s reputation. What modification could mitigate the risks? Options
include etching the warning on the product, including explicit warning in product literature,
and publicizing the danger to day care facilities and retailers.
Step 5: Monitor Outcome
The final step in ethical decision making is to assess the outcome from implementing the
chosen alternative to learn from the decision process. Consider how the action taken meets
the following tests:
•
•
•
Will the decision stand the test of time?
Is this a model of “right” behavior?
Am I proud of the decision?
If any answers are negative, then the decision maker should reassess factors influencing the
ethical decision-making process. Bazerman and Tenbrunsel (2011b) assert that “cognitive
biases and organizational systems blind managers to unethical behavior, whether their own
or that of others” (p. 61). People tend to believe they are more ethical than they really are,
and organizations can’t rely on an ethical program to ensure ethical decisions. Consider if the
manager in the toy scenario decided to do nothing, and there were no allergic reactions attributed to the toy. Does that make the decision ethical? According to Bazerman and Tenbrunsel
(2011b), a reason for many ethical lapses is management’s tendency to overlook unethical
behaviors when outcomes are good.
The consequences of an ethical decision may not be evident immediately. For instance, General Motors (GM) has come under scrutiny of safety regulators for failing to replace a fatally
flawed ignition switch in Chevrolet Cobalts due to cost, estimated by some reports as less than
$1 (Nelson, 2014). As of April 2014, GM had recalled 2.2 million cars and incurred expenses
of $1.3 billion in repairs because of faulty ignition switches causing 13 deaths over a decade
(Muller, 2014b). The decision not to correct this known hazard costs lives, creates financial
burdens, and damages GM’s reputation. Organizations should take note and avoid the ethical
traps and blind spots that prevent ethical decisions.
Chapter Summary
Summary & Resources
Understanding the role that ethical theory and moral development has on ethical decision
making facilitates effective handling of dilemmas in the workplace. Ethical theories fall into
three ethical traditions that reflect teleological or deontological ethics for answering the
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Summary & Resources
question, “what is the right thing to do?” The first relates to actions—focusing on what a
company or individual is doing. The next tradition considers the agent—focusing on who, or
the character of company or person. The final tradition considers the outcome—focusing on
the consequences of a decision. While one dimension may be more prevalent than another, a
typical business decision incorporates all three approaches.
Individual factors influence ethical decision making. Three decision-making styles include
idealism, pragmatism, and opportunism. Moral reasoning involves transforming values,
beliefs, and principles into action. People develop moral reasoning gradually, becoming more
sophisticated at reasoning through ethical dilemmas over time. Six stages of moral development include three levels that relate to preconventional (self-centered), conventional (conformity), and postconventional (principled). There are three social needs that may motivate
an individual in an ethical decision-making situation: achievement, affiliation, and power.
Individuals with high relativism feel that one cannot make claims of right or wrong, whereas
individuals with high moral idealism expect that the right action is attainable in all situations.
Cultural differences influence moral philosophies and ethical positions, increasing potential
for conflicts within a global organization.
An ethical decision model is a resource for individuals to work through an ethical issue when
the right decision is not evident. The model provides employees with a process to help them
analyze ethical issues in routine business situations. Each step of the model involves further
reflection to 1) identify the issue, 2) identify the stakeholders, 3) analyze alternatives, 4) take
action, and 5) monitor outcomes.
Key Terms
categorical imperative A philosophy that
decisions must be suitable for all parties
faced with the same dilemma.
consequentialism Ethical philosophies
that presume that the value of an action
derives from the value of its outcomes.
deontological ethics Moral philosophies
that determine the ethics of an action in
relation to conformity to rules or laws.
distributive justice Moral philosophies
that relate to the fairness of outcomes.
ethical decision-making model A
resource or tool designed to help employees
work through an ethical dilemma.
ethical egoism A moral philosophy that
considers an action to be morally right when
it maximizes one’s self-interest.
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ethics of care An ethical theory encompassing social virtues that focuses on maintaining relationships.
idealist A person who acts on his or her
moral ideals, no matter what.
moral idealism The expectation that the
right action is attainable in all situations.
moral judgment The process an individual
undertakes to weigh choices and determine
which should be implemented.
moral reasoning The process in which
individuals define whether an action is morally right.
need for achievement An individual’s preference for goals that are well defined and
moderately challenging.
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need for affiliation An individual’s inclination to work with others in the organization
rather than alone.
need for power An individual’s desire to
have influence and control over others.
opportunist A person who is driven exclusively by his or her own material welfare.
pragmatist A person who acts on moral
values only if such behavior does not place
himself or herself at a disadvantage.
stages of moral development Kohlberg’s
theory positing that individuals naturally
progress through a series of definite and
describable stages of moral reasoning.
teleological ethics Moral theories positing
that the rightness of a decision comes from
being a good person and the results.
tribalism A predisposition to act in union
with others to achieve the greater good for
the group.
utilitarian calculus The act of giving
numerical values to various consequences
of an action and mathematically assessing
whether the good outweighs the bad.
utilitarianism The philosophy that an
ethical decision is the one that provides the
greatest good for the greatest number.
virtue ethics Ethical theory that considers
the moral character of individuals in making
good decisions.
Critical Thinking and Discussion Questions
1. How does management discuss ethics at your current or former workplace? Why
would managers avoid discussing ethics or ethical philosophies with employees?
Develop a strategy for communicating an ethical decision-making framework to a
workforce.
2. What are the alternatives for handling each of the following situations? Assess each
alternative using the action, actor, and outcome ethical traditions. What would you
do in each case?
a. Business is suffering, and employees are leaving your sinking ship. You hold a
meeting with existing employees who want to know if their jobs are safe.
b. Company product prices are going up January 1. Your supervisor tells you to
move a customer’s automatic shipment for December to January 1 so you can
charge the higher rates.
c. You are driving to a project status report meeting with your client and are considering whether to tell the client that the team encountered a significant technical
problem that has put the project behind schedule.
3. Think back to a situation you have personally encountered at work that involved
ethical choices. How did you make a decision? Which ethical traditions tended to
shape your thinking about the situation—rules, character, or outcomes? Were you
satisfied with your choice?
4. Why do your decisions on ethical issues matter? What do you find to be the most
challenging part of making an ethical decision? How can you improve your moral
reasoning in the workplace?
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Summary & Resources
Case Study: Whistle-blower to Press
Sheila is the manager of a strategic planning department of a multinational organization that
owns and manages apparel-manufacturing facilities in a developing country. The company’s
advertising emphasizes the organization’s “partnership with the developing world.” In recent
weeks, the company has been the subject of a series of critical articles in a national paper.
The articles have contained detailed exposés about the exploitive pay and conditions in the
factories. The newspaper has also commented unfavorably on the arrangements that the
organization made with the country’s government for the repatriation of profits.
The information in the articles includes confidential company information, and it is evident
that a member of the organization has been supplying the information. The organization has a
rule that staff members “must not disclose commercial information to unauthorized persons”
and another that says “all contact with the press must be handled by the properly authorized
officers.” The company leadership is adamant that employees abide by the policy worldwide.
Sheila is mortified that the company for which she works could engage in such activities in
these countries. It goes against her personal sense of fairness. At a social function, a member
of Sheila’s department, Kevin, inadvertently blurts that he has been supplying the information to the newspaper. Kevin immediately recognizes that he should not have told Sheila and
says, “You must ignore what I have said or I will be sacked.”
Source: Adapted from “In the News,” from the Institute of Business Ethics. (http://www.ibe
.org.uk/)
Questions to Consider
1.
2.
3.
What are the issues in this scenario that create an ethical dilemma for Sheila?
What should Sheila do with the information learned from Kevin? Assess the
situation using an ethical decision framework for the best manner for Sheila to
handle this situation.
Which ethical traditions tended to shape your thinking about the situation—rules,
character, or outcomes? Or, were they all roughly the same? Why do you think that is?
Suggested Resources
Daniels Fund
http://www.danielsfund.org/
Ethical Decision Making, Markkula Center for Applied Ethics
http://www.scu.edu/ethics/practicing/decision/
The PLUS Decision Making Model, Ethics Resource Center
http://www.ethics.org/resource/plus-decision-making-model
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