Ethics and Business

UNIT 3 ETHICAL DILEMMAS

Objectives
After reading this unit, you should be able to:
 Appreciate the nuances involved in ethical decision-making
 Develop an ability to avoid knee-jerk reactions to ethical dilemmas
 Understand various approaches to confront and overcome ethical dilemmas
 Understand the concept of Social Accounting and its linkages with Ethical
Decision-Making
Structure
3.1 Introduction
3.2 Ethical Approaches to Ethical Decision-Making
3.3 Overcoming Ethical Dilemmas
3.4 Ethical Navigation Wheel and Overcoming Ethical Dilemmas
3.5 Lynn Paine’s Concept of Moral Compass
3.6 Kidder’s Ethical Checkpoints
3.7 Ethical Dilemmas, Stakeholder Management and Social Accounting
3.8 Summary
3.9 Key Words
3.10 Self-Assessment Questions
3.11 References/Further Readings

3.1 INTRODUCTION
We are confronted with the challenges of ethical decision-making in our daily lives.
Invariably we also make judgments about the ethical aspects of the events that happen
around us. Often, our reaction to the events we do not deserve in our perception
is to react by stating, ‘it’s not fair.’ Responses like this bear ample proof that each
of us has our understanding of what constitutes ‘fairness’ and ‘justice’. Like any of
us, the people in our personal and professional lives constantly judge our actions.
Ethical decision-making is challenging because our efforts are constantly under scrutiny.
It is pertinent to understand and appreciate the various aspects of ethical decision-
making. But a more fundamental question is what constitutes an ethical decision.
Multiple factors include an ethical decision. However, some important ones are as
follows:
a) Other-regarding actions: Utilitarian thinkers like Bentham divided human
activities into self-regarding and other-regarding. In the context of ethical
decision-making, managers need to be very conscious of other-regarding
actions, that is, those actions which the manager as an agency of the firm.
38
 Since the firm’s legal and social obligations tend to get fulfilled by the Ethical Dilemmas
managerial agency and managerial decision-making has a bearing on the
social good, it is pertinent for managers to consider the impact of their
actions on others
b) Availability of More than One Choice: Any ethical decision-making
involves a sense of moral judgement, which determines our choice to prioritize
one action over others that are available to us. The availability of more
than one ethical choice leads us to face ethical dilemmas.
c) Perception of Our Actions by Other Stakeholders: It is not enough to
analyze our actions and ethical choices through the lens of self-regarding
and other regarding. A manager also needs to consider other stakeholders’
perceptions regarding their actions. If others perceive managerial decision-
making to impact other stakeholders’, welfare of different stakeholders and
have ethical implications, then a certain degree of managerial caution is
required.
Thomas Jones, a prominent scholar on ethical decision-making, advanced a four-
stage process. According to the Jones model, individuals experience a process whereby
they 1) Recognize a moral issue (moral recognition), 2) Engage in moral judgement,
that is, determining which action is the most appropriate ethical choice 3) Establish
a moral intent and 4) Finally act according to intentions. In the latter sections, we
discuss some prominent ethical decision-making theories and models that enable
us to overcome ethical dilemmas.
Let us take the example of an ethical issue that has garnered much attention in
business organizations and involves a high likelihood of clashing personal and
professional ethical issues. The media often covers stories of senior executives losing
their jobs owing to some romantic entanglements in the workplace. Male and female
executives have been fired for romantic involvement with their subordinates. Often,
romantic entanglements in the office involve ethical issues related to conflict of interest
and abuse of authority. Cases of romantic involvement in professional lives raise
the following questions: a) To what extent romantic involvement in offices is a private
matter, and b) To what extent may an employer restrict personal liberties in romantic
matters?
Some corporate organizations have employment rules that overtly discourage their
employees’ freedom to date co-workers. These rules have attracted wider attention
today due to the growing number of women in the workplace. Although this issue
is rife with ethical implications, it has been covered far more extensively by scholars
belonging to the legal domain. Several reasons cause corporate organizations to
dissuade employees from engaging in romantic involvements. First, employers advance
the argument that the organization has a moral duty to protect its employees from
sexual harassment in the workplace and prevent the possibility of adultery by married
employees. Second, there are specific sectors in the industry where employee romance
restrictions are based on the inherent conflict of interest. Third, some corporate
organizations perceive romantic involvement between their employees as a significant
irritant to efficiency at the workplace. The argument advanced is that romance in
the workplace severely impacts overall workplace productivity and should be banned.
Finally, employers are highly vigilant about workplace romance. This vigilance is
owing to a) possibility that a breakdown of workplace romance can vitiate the
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Ethics and Business workplace environment and b) in case of superior-subordinate romantic involvement,
possibilities of conflict of interest may lead to other co-workers raising grievances
on the grounds of favoritism.
Considering the discussion above, we can divide the factors affecting ethical decision-
making into two broad categories: a) individual and b) situational factors. Individual
factors concern the individual ethical personalities making a particular decision. These
factors about an individual’s ethical biases stem from one’s natural traits and
socialization. Situational factors include a specific context that determines the ethical
decision-making of the protagonists. These situational factors include incentive
systems, job roles, and the prevailing ethical climate in the organization. Situational
factors are further classified into a) issue-related factors: depending on and b) context-
related factors.

3.2 ETHICAL APPROACH TO ETHICAL DECISION-

MAKING
In his work “The role of Ethics in the Framing of Decisions,” Miquel Baston explains
how ethical approaches can be adopted to improve decision-making and labels
this challenge as a ‘structuring problem.’ Baston describes this problem as ‘the point
in which the contributions of ethics could be recovered to improve the theory of
decision.’ Further, Baston contends that the structure of a decision problem comes
from finding answers to the following questions: a) what can I do in this situation?
B) What outcome will the action have? And c) what is the goal? Each of these
questions can be briefly elaborated on as follows:
a) What can I do in this situation? It involves exercising all the faculties
possible to determine the feasibility of exercising the various possible actions
open to them. This phase is known as ‘operating’ the decision problem.
This stage involves assessing the costs and the objective assessment of
weighing options to arrive at the most efficient options available. This stage
consists in summoning all the courage and fortitude
b) What outcome will the action have? This question involves engaging in
a cost-benefit analysis of the results of the action the subject decides to
perform. This stage involves ‘predicting’ the outcomes of the step. It assesses
the protagonist’s knowledge to be prudent and exercise one’s moral faculties
to determine which action will lead to the most just and fair solution. This
stage calls for developing the ability to establish a sense of certainty regarding
the various possible outcomes that are likely to follow
c) What is the Goal? Assessing the costs and benefits of the actions possible
involves determining the subject’s final motives while acting. In short, it
consists in evaluating the various outcomes of an effort. This stage involves
a certain sense of moral intent and moral will to execute a specific action
finally.

3.3 OVERCOMING ETHICAL DILEMMAS

We are frequently confronted with ethical challenges in our daily lives and are often
40 in a dilemma regarding the right thing to do. While the judgements we make to
exercise our decision-making in our daily lives. Whereas the decision-making in Ethical Dilemmas
our capacities only affect our immediate family and us, relatives and friends’ decision-
making in a professional capacity can make a difference to a larger ecosystem. An
engineer who takes bribes and ignores the construction of unsafe bridges and a
doctor who prescribes expensive drugs for commissions they get from medical
representatives are examples of wrong ethical choices made by people in their
professional capacities. In the corporate world, managerial decision-making is more
challenging because of the grey areas managers are likely to face. Therefore, business
ethics education has paid great attention to ethical decision-making.
Business ethics scholarship has summarized ethical decision-making dilemmas of
managers by mentioning five tensions a) personal morality versus professional ethics,
b) individual welfare versus community welfare, c) short term versus long term, d)
corporate need versus corporate greed, and e) error in judgement versus arrogance.
The managerial agency being confronted with decision-making not only has to maximize
shareholder returns but also ensure fulfillment of the legal and social obligations of
the firm. In dealing with the dilemmas involving shareholder versus stakeholder
management, the managers face the ‘dirty hands’ problem. Joseph Badaracco Jr.,
one of the formidable scholars in business ethics scholarship, calls it the ‘right versus
dilemma.’
Badaracco’s landmark work, ‘The Functions of the Executive’ on managers and
business organizations, talks about the ‘four spheres of Executive Responsibility.’
According to Badaracco Jr., every manager has four spheres of executive
responsibility. To begin with, they have their own set of individual values and ethical
personalities. While consequentialist approaches influence someone’s ethical values,
others adopt a duty-oriented approach. Further, the manager is also motivated to
uphold the rights of the shareholder and employees and even held accountable
whenever the customers’ rights stand violated. In addition, the manager is the custodian
of organizational values and is influenced by Aristotle’s virtue ethics. Aristotle’s virtue
ethics advocates that virtuous conduct is more of a habit than a choice. Those who
are habitually ethical experience less moral inertia while doing the right thing whenever
confronted with an ethical dilemma. Finally, managers must contend with the various
pulls and pressures and engage in a game of tug of war where he is pulled in multiple
directions by one set of values against another. During such situations, the manager
must be pragmatic.
Further, he should summon the courage to fulfill his managerial role and stay true
to his ethical choices. In Machiavellian terms, the manager must use his discretion
to play the ‘lion’ and the ‘fox’ when the situation demands. But when does the manager
play the ‘lion,’ and when does he play the ‘fox.’ This dilemma raises a fundamental
issue in ethical decision-making. Since a manager’s ethical decision manifests their
moral judgement, it is pertinent to understand the process.
In the context of ethical dilemmas, business ethics education has been primarily
influenced by Kohlberg’s theory of moral development and later James Rest’s moral
schemas. In the last twenty years, a group of scholars in the domain of behavioral
psychology called social intuitionists have provided new insights into individual
decision-making. It is worth understanding the dominant view in ethical decision-
making scholarship as advanced by Lawrence Kohlberg and James Rest which laid
the foundations for studying ethical decision-making by highlighting the cognitive
moral development of individuals. 41
Ethics and Business Lawrence Kohlberg is widely recognized as a leading authority on that individuals’
cognitive moral development occurs through three main stages: pre-conventional,
conventional, and post-conventional. Further, these three stages were divided into
two or more sub-stages. Kohlberg suggested that in the pre-conventional stage,
an individual’s moral development is conditioned by the deterrent effect of punishment
by authorities in social institutions like family and school. In the conventional stage
individual’s morality is conditioned by an individual’s propensity to act following
the mandate of the social mores and avoid indulging in those actions, which may
lead to the breakdown of systems. Dan Ariely, a behavioral economist, in his work
‘The Honest Truth about Dishonesty,’ has put forward the concept of the ‘fudge
factor,’ which highlights that humans tend to view themselves as honest even when
they engage in deceitful behavior. This behavior stems from humans engaging in
conduct that synchronizes with social mores. In the post-conventional stage, Kohlberg
suggests that an individual’s moral development reaches a stage tendency stem from
where he can elevate his overall moral personality and has a self-imposed obligation
to engage in actions that make others happy. This personal obligation arises from
one’s social contract with the larger society to abide by the legal and social mandate.
Rest spoke of four components in ethical decision-making, namely, moral sensitivity,
moral judgment, moral motivation, and moral character. Let us try to understand
each of these components. Most of us, unlike the saints with the clairvoyant ability
and hard-headed criminals, are constantly challenged with ethical decision-making.
We invariably get confused about the right thing to do during such times. In other
words, we face ethical dilemmas. But facing a dilemma implies recognizing the co-
existence of certain rights and wrongs in which we face dilemmas. Therefore, moral
sensitivity or recognition is the awareness of conflicting ethical values. The person
concerned is aware of ethical problems and engages in the process of ethical self-
inquiry, like a) how does my behavior impact others, b) what are the various possible
courses of action, and then determines the outcomes of each strategy. In short, this
stage forces one to engage in moral reasoning, which facilitates one’s transit to the
second component, moral judgement. Moral judgment is about choosing between
the various courses of action after determining the various aspects of an ethical
problem. It is essential to remember that the moral reasoning one exercises to choose
a particular course of action over another determines moral judgment. Rest argued
that defective reason stemming from insecurities, greed, and egocentric behavior
clouds moral judgment. Business ethics education has conventionally based itself
on the understanding that moral reasoning always precedes moral judgement.
The third component in Rest’s model comprises moral motivation, whereby the subject
is motivated by the twin factors of rewards and emotions. These rewards need not
necessarily be monetary but can also extend to non-monetary ones. The final
component in Rest’s model comprises moral character. Let us try to limit ourselves
to the first two components. According to Rest’s model, moral reasoning precedes
moral judgement. But as mentioned earlier, a new group of behavioral psychology
thinkers like social intuitionists has argued that moral judgement precedes moral
reasoning, and the latter is merely an ex post facto justification of the former.

3.4 ETHICAL NAVIGATION WHEEL AND

OVERCOMING ETHICAL DILEMMAS
Scholarship in business ethics has not confined itself to dealing with the challenges
42 of ethical dilemmas. Scholars also have advanced frameworks to help managers
confront the challenge of ethical decision-making. As against Badaracco Jr’s Ethical Dilemmas
understanding of an ethical dilemma in terms of right versus right, two Norwegian
scholars, Kvalnes and Ovarenget, perceive a moral dilemma as a situation that calls
for a choice between two wrongs. The subject facing the moral dilemma is confronted
with a situation where two moral values or duties are equally compelling. Still, only
one of the two existing choices can be exercised. The two Norwegian scholars
have advanced a six-step ethical navigation wheel to overcome ethical dilemmas.
The following is a diagrammatic representation of the ethical navigation wheel.

Law

Ethics Identity

What do
You do?

Economy Morality

Reputation

Source: Kvalnes, Ø., & Øverenget, E. (2012). Ethical navigation in leadership training. Nordic
Journal of Applied Ethics, (1), 58-71

One of the noticeable distinctions in the ethical navigation wheel is the distinction
between ethics and morality. In our daily lives, we tend to use these two words
interchangeably, but in the case of the ethical navigation wheel, there is a clear distinction
that is brought out between the two. Morality is understood as a set of beliefs and
values developed over time. In this regard, morality stems from a certain kind of
socialization that we experience instead of our close association and interactions
with family, friends, school, and college. Ethics is a systematic approach that helps
us deal with challenges stemming from moral relativism by equipping us with normative
tools.
The six steps in the ethical navigation wheel are not to be considered as a universal
solution that starts by asking questions arising from the legal aspects of the dilemma
and ends with the ethical ones. Depending on the subject facing the dilemma, one
can navigate from any section of the wheel to the other end. Prioritization and
weightage to each of the aspects of the navigation wheel is a matter of individual
choice. Each of the six elements in the navigation wheel can be briefly described
as follows:
1) Law (Is it Legal): If a manager faces an ethical dilemma, one can begin by
asking whether the managerial action is legally acceptable. Sometimes the 43
Ethics and Business legal obligations may not be the most preferred course of action, but the
manager is obliged to fulfill the legal obligations of the firm and ensure that
his actions do not violate the law of the land
2) Identity (Mapping with Values): Different professions can identify with a
separate set of values. For instance, it is expected that professionals in
finance and accounting are objective and transparent, and health professionals
are expected to prioritize ethics of care. Therefore, managers need to map
their decision-making with the values of their industry
3) Morality (Is it Right?): A manager facing a dilemma needs to question whether
their decision-making is as per their morality. Morality, in this sense, is about
one’s basic understanding of right and wrong. Even though different individuals
experience various kinds of socialization, there is some basic consensus
on what constitutes morality among people belonging to a particular
ecosystem. For instance, there is an Indian sense of morality, a Chinese
sense of morality, and an American sense of morality. A certain sense of
right and wrong is determined by a certain sense of morality derived from
unique socialization patterns. In China, exchanging gifts in the professional
world helps develop a friendship (guanxi in mandarin); therefore, it is not
identified with corruption. In the west, exchanging gifts in a professional
capacity is considered a bribe; it is not only unethical but also illegal.
4) Reputation (Impact on the Goodwill): Firms are very conscious of their
image in the public domain. In today’s world, where news travels extremely
fast via social media, managers need to be very wary of the impact of their
decision-making. Reputations come down like cards if important stakeholders
perceive managerial decision-making poorly. Dissatisfied stakeholders can
cause more than a dent in corporate reputation; therefore, managerial
decision-making should consider stakeholder management’s merits.
5) Economy (Impact on Firm’s Profits): In managerial decision-making, the
most acute challenge for managers is to make the right kind of choices in
the face of dilemmas that compel them to choose between the corporation’s
profits and the optimal ethical outcomes.
6) Ethics (Challenge of Justifying): To justify the ethical choices, we need to
scan our proposed action through two principles, namely a) principle of
equality and b) principle of publicity. The principle of equality states that
similar cases should be treated equally. The only condition where a distinction
can be drawn between two identical points is when they are morally different
in at least one aspect. For instance, when do we know that a gift is a bribe?
Using the principle of equality, we need to ask a series of questions. Some
of these questions can be 1) Who is the giver and receiver 2) When was
the gift given (before the contract, during the execution of a contract, or
at the fag end of the contract), and what were the motives of the gift giver,
etc. If the answer to these questions is different, then we can safely infer
that a gift is other than a bribe.
The principle of publicity is about the conviction that we can defend our actions in
the public domain without any sense of moral guilt. Suppose we can confidently
44 defend our activities during our interactions with colleagues in the workplace, or
we can share the decision we have taken with the people we love the most. In that Ethical Dilemmas
case, we can be particular about the ethicality of our actions. In the case of ethical
dilemmas, one can focus on all six questions on the navigation wheel. The conditions
considering the various tensions amount to those between economy versus identity,
law, morality, ethics, and reputation.
Activity 1
Draw the six-step ethical navigation wheel to overcome ethical dilemmas and explain
each point briefly.
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3.5 LYNN PAINE’S CONCEPT OF MORAL

COMPASS
Harvard University Lynn Paine offers a four-part ‘moral compass’ for guiding
managerial decision-making. Paine recommended that managers develop the habit
of examining the ethical aspects of every major and even the most routine decisions
with/her team. Paine’s four frames closely resemble Edward Freeman’s stakeholder
management theory and argued that it is fallacious to separate business and ethical
conduct. Freeman advanced the integration thesis, which comprises two premises,1)
every business decision has a moral component, and b) every ethical decision in
the managerial capacity has a business component. Further, Freeman recommended
that managers develop the ‘responsibility principle’ quotient and engage in an ‘open
question argument. ‘The ‘responsibility principle’ invokes managers to accept
responsibility for their actions. Finally, the ‘open question argument’ calls upon managers
to engage in self-examination while carrying out their managerial role on the following
lines 1) if a particular decision is made for whom the value is created and destroyed,
2) who is harmed and benefited with a particular decision? 3) whose rights are
upheld and whose are violated by a specific decision? And 4) what kind of person
I/We will become if I make the decision?
Lynn Paine’s four frames of reference can be briefly described as follows. The first
frame expects managers to examine the following question a) Will this action serve
a worthwhile purpose? The basic idea behind this question is to make managers
analyze the results in both short- and long-term consequences. Besides, they inspire
managers to examine whether these results are worth pursuing critically. The second
frame highlights the need to scan the executive action by subjecting it to a searching
analysis by invoking ethical concepts and principles that address issues like norms
of good governance, legal and social obligations of the firm, code of conduct, etc.
To be precise, the second frame asks: Is this action consistent with relevant principles?
The third frame deals with the consequences borne out of managerial activity. Such
an exercise necessitates cultivating a sense of sympathy and empathy for the bearings
of managerial action on other stakeholders. In short, the manager needs to ask:
does this action respect the legitimate claims of the people affected? The fourth
45
Ethics and Business and final frame in Paine’s moral compass inspires managers to dig deep and critically
examine their ability to exercise their influence as managers. Therefore, this frame
encourages managers to ask: Do I/ we have the power to act?

3.6 KIDDER’S ETHICAL CHECK POINTS

Rushworth Kidder, an ethicist, opined that ethical issues are overly complex and
can be challenging. Kidder recommended nine-step checkpoints to tide over the
complexities of ethical decision-making. The first checkpoint is to have moral
awareness/sensitivity to recognize the presence of a moral issue. The second
checkpoint is determining the protagonists and checking whether the concerned subject
is involved. More importantly, the subject is mandated to bear responsibility and
needs to take a desirable action. The third checkpoint is to ensure that the concerned
subject considers all the relevant facts before making moral judgments and engaging
in ethical decision-making. In fact, unlike common perception and understanding,
unethical managerial practices are not necessarily due to a lack of ethical intent but
are often caused by information asymmetry. Therefore, managers must address the
question of inadequate information. The next checkpoint is to determine whether
the ethical issues are right or wrong. Kidder proposed a four-fold test to determine
the right versus wrong issues. These tests are 1) legal tests which provide legal
perspectives 2) the stench test/smell test, which gives an intuitive feeling about the
appropriateness of the issue 3) front-page test, which helps us determine the ethicality
of an issue by making us ask if our private actions are made public would we be
comfortable with such a situation and 4) the mom test/aunt’s test which helps us
determine the right versus wrong of an issue by prodding us to ask whether our
mother or our favorite auntie would approve of our judgement or action.
The fifth checkpoint is regarding the test for right versus suitable paradigms. The
categories of these dilemmas are as follows a) justice versus mercy, b) short term
versus long term, and c) truth versus loyalty. The sixth checkpoint is to apply
checkpoints four and five, respectively. The seventh checkpoint encourages managers
to move beyond dilemmas to trilemmas and exercise their ‘moral imagination’ to
find out of box solutions. The eighth and ninth checkpoints concern deciding and
then following it up with revisiting and reflecting.
In his book ‘Organizational Ethics: A Practical Approach,’ C E Johnson put forward
his five ‘I’ format. The five ‘I’ format was expanded as a) identifying the problem,
b) investigating the problem, c) innovating by exploring the broad range of viable
solutions, d) isolating by zeroing in on the most appropriate solution, and then finally,
e) implementing the solution.
Activity 2
Describe briefly Kidder’s nine-step checkpoints to tide over the complexities of
ethical decision-making.
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 Ethical Dilemmas
3.7 ETHICAL DILEMMAS, STAKEHOLDER
MANAGEMENT AND SOCIAL ACCOUNTING
The ecosystems in which businesses function today are becoming increasingly complex.
As the firm’s agency, managers face ethical dilemmas from fresh debates around
the firm’s legal and social obligations. Whether it is new regulations owing to national
security considerations or growing activism from civil society organizations, managers
are increasingly subjected to ethical performance. But how does one measure the
ethical performance of managers? Various initiatives have recently been undertaken
in social auditing, environmental accounting and sustainability reporting, and even
ethical auditing. For easy understanding, let us label these initiatives under ‘social
accounting.’ According to Crane and Matten, social accounting ‘is the voluntary
process concerned with assessing and communicating organizational activities and
impacts on social, ethical, and environmental issues relevant to stakeholders.’
Despite the term’s popularity, there is a lack of consensus regarding what constitutes
the process of social accounting. The lack of formal standards and established
assessment parameters or industry-wide accepted norms for organizational
communication with stakeholders has made the challenge of social accounting more
formidable. Social accounting has confined itself to stakeholder consultation and
dialogue. Since the managers function as agents of the firm, the firm’s actions are
deciphered by how they confront ethical dilemmas. These dilemmas can be broadly
summarised as stakeholder management. Growing public scepticism of the corporate
organizations and even resurfacing of economic nationalism prompting the market-
friendly states to regulate corporates owing to perceptions related to national security
compromises have led to renewed discussions on social accounting.
Given renewed attention to social accounting, examining some factors that have
brought this theme under more significant consideration is pertinent. Appreciation
of these factors will enable managers to develop a more informed understanding
of the various repercussions of resolving ethical dilemmas at the workplace. Growing
pressures from government, civil society organizations, social media, industry
associations, and consumers, apart from internal sources like employees and
shareholders, make managers compelled to re-evaluate their actions whenever they
confront ethical dilemmas. Yet another factor that has made social auditing critical
is its relevance in helping managers identify risks. Identifying potential risks has led
to managers’ ethical decision-making revisiting how they confront ethical dilemmas.
This kind of risk identification has facilitated improved stakeholder management.
Improved stakeholder management translates to a higher degree of accountability
and transparency.
As leaders of their firms, managers are perceived as major ethical drivers in establishing
or driving change. As public leaders, managers not only consider themselves as
influencers but are widely perceived as change agents representing their organizations.
Ethical decision-making occupies a critical role in managerial decision-making because
organizational transformation, as per changes in the larger ecosystem, demands that
firms’ goals are confined to their financial performance and environmental and societal
contribution. Today’s ‘wicked problems and grand challenges facing businesses desire
new managerial abilities in dealing with delicate issues concerning multiple constituencies
and their perspectives prevailing in the larger ecosystem.
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Ethics and Business Managers can relate to their constituencies from three broad orientations: immorality,
amorality, and morality. Immorality pertains to adopting unethical approaches whenever
managers face ethical dilemmas. Immoral management means consciously adopting
those practices against ethical principles of justice and fairness. A moral management
implies that although the managers are not deliberately executing actions that will
hurt the internal and external stakeholders, they tend to be indifferent or negligent.
Stakeholders’ interests are negotiable in exchange for the firm’s economic interests.
Moral management by owners includes conscious steps managers take to incorporate
ethical practices. Such managerial actions include establishing transparent codes of
conduct, and fair treatment of shareholders, employees, customers, and other vital
stakeholders.
Complex ethical dilemmas in the corporate world involve making difficult choices
among divergent interests. The manager must play the game of tug of war with multiple
constituencies. Individual managers can clearly understand their actions and motivations
by distinguishing them from others. Having an informed understanding of the ethical
rationale behind their decision-making, managers can critically reason and develop
empathy towards other stakeholders. Invariably ethical decision-making is
compromised owing to ignorance and bias, the twin factors that hinder moral
awareness. A wide range of ethical principles and tests have been discussed in this
unit to help managers draw on when they are confronted with ethical dilemmas. As
discussed earlier, the business landscape is evolving very swiftly. Do the various
models and tests enable managers to deal with ethical dilemmas in the workplace
in the real world? Whether it is the navigation wheel or any other model dissecting
the ethical issues is always a thankless task. The various stages and processes of
varying urgency make it difficult for managers to develop objective criteria to resolve
ethical dilemmas. Moreover, the various individual factors and situational factors
further exacerbate the issues. Nevertheless, the different models and tests presented
in this unit enable managers to minimize, if not eradicate, their individual biases while
confronting ethical dilemmas.

3.8 SUMMARY
Given the rapid pace of changes in the business landscape and growing complexities
in managerial decision-making, it is very pertinent for managers to develop some
awareness and knowledge about objective ways of overcoming ethical dilemmas.
This unit has broadly discussed the individual and situational factors in decision-
making. However, beyond these factors, it is critical for management school participants
to understand the relationship between moral sensitivity/awareness, moral reasoning,
and moral judgement. Kohlberg’s theory of moral development and James Rest’s
theory have been the dominant theories concerning ethical decision-making. These
theories have focussed on individual factors in ethical decision-making. However,
many other approaches have been advocated focussing on situational factors. Some
noticeable ones are the ethical navigation wheel, Lynne Paine’s, and Kidder’s ethical
checkpoints. This unit also highlights how ethical decision-making of managers will
not only enable them to become better in stakeholder management and more effective
agencies to enhance the firm’s social accounting.

3.9 KEY WORDS

Ethical Decision- : The ethical decision making process recognizes these
48 making conditions and requires reviewing all available options,
 eliminating unethical views and choosing the best ethical Ethical Dilemmas
alternative.
Ethical Dilemmas : An ethical dilemma takes place in a decision-making context
where any of the available options requires the agent to
violate or compromise on their ethical standards.
Ethical Navigation : The Navigation Wheel offers a framework for analyzing
wheel concrete ethical dilemmas.
Moral Compass : Moral compass as the person’s ability to judge what is right
and wrong and act accordingly.
Social Accounting : Social accounting is “the measurement and reporting of
information concerning the impact of an entity and its activities
on society.

3.10 SELF-ASSESSMENT QUESTIONS

Exercise
You are a senior manager in a corporate organization in the food and beverage
industry. You are about to launch a new product, a new beverage that promises to
be a game changer and catapult you to be the number one player in the industry.
With only two weeks before the launch, you know that the new soft drink your
firm is about to launch will severely impact the consumers’ health. The reason is
that the soft drink is prepared from contaminated water. The dirty water is being
drawn from a region that has witnessed increasing instances of groundwater pollution
due to the local farmers’ overuse of pesticides and other chemicals. The firm has
water treatment facilities in its plant, but the existing facilities have failed to treat
the polluted groundwater comprising harmful chemicals. As soon as you know that
the new soft drink will be highly damaging to the consumers, you escalate the matter
and seek the CEO’s appointment. The CEO has a meeting with the topmost
executives of the firm and agrees to give some time to his team to address the issue.
After a few days, the group explored the diverse options available to the firm but
concluded that the only solution to deal with the situation was to postpone the launch
of the soft drink. Once the team led by the manager apprises the CEO of the problem,
the latter states adamantly that under no circumstances he will not allow the delay
of the launch of the soft drink. He says that postponing the launch will lead to a
significant compromise with the firm’s reputation.
Further, it will harm the firm’s IPO scheduled in a month. The CEO promises that
once the product is launched, the firm can invest in state-of-the-art water treatment
facilities and set things right shortly. As a senior manager, you are concerned about
the impact of the soft drink launch on consumers. The effect will be far more detrimental
to the health of consumers like pregnant women and children. The CEO walks out
of the meeting, stating that the only thing that matters in business is profit, and under
any circumstances, he will not allow the postponement of the product launch.
Given the above case, answer the following:
1. As a senior manager, what would you do? How do you resolve the ethical
dilemmas arising out of this situation?
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Ethics and Business 2. What are the assorted options available to you, and how do you engage
in a cost-benefit analysis of each option?
3. Use the various theories/tests/ techniques mentioned in the unit to exercise
the best feasible option/ Can you use any of the theories to convince your
CEO to delay the product launch? If yes, how?

3.11 REFERENCES/ FURTHER READINGS

Kvalnes, Ø., & Øverenget, E. (2012). Ethical navigation in leadership
training. Etikkipraksis-Nordic Journal of Applied Ethics, (1), 58-71.
Paine, L. S. (2006). A compass for decision making. In Responsible leadership (pp.
74-87). Routledge.
Johnson, Craig E. Ethics in the workplace: Tools and tactics for organizational
transformation. Sage Publications, 2009.

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