Ethical Decision Making in

Organizations
built – in values from school, home, religion…
ethics: rules of conduct practiced in
a particular culture

morals: rules of individual behavior

Moral dilemmas: disagreements

about ethical principles in a situation
Factors Influencing Behaviour

opportunity

Organizational Individual Moral

environment
Behavior philosophy

Organizational
Behaviour/locus
of control
 How are they Made?
• End –the outcome sought
• Means – the methods employed
• Motive- the urge in making the decisions
• Foreseeable consequences
The Role of Moral Philosophies in Decision
making
Moral Philosophy
A set of principles setting forth what is believed to
be the right way to behave
Role
It is something that is moral conforms to a
standard of acceptability
Philosophy
A study of the general principles of a subject such
as morality
 Moral Philosophy
• Basis of their
Utilitarian outcomes or
consequences

Moral Philosophy

Humanistic • Human values

Suggestions for ethical Decision Making
• Top Management can improve behaviour
• Codes of ethics improve decision making
• Interaction with peers and other colleagues
• Control system
 The Ethical Organization

Courageous charitable
People just sensitive
magnanimous

Not fully Foolishness

responsible for envy
what they did Deviousness
Difficulties in Decision Making

Cross –Cultural
Contradictions

Personal
Competitive
gain/Dubious
pressures
Charcter
Sources
of Ethical
Problems

Individual
Managers values in
Values and conflict with
Attributes organizational
goals
 Difficulties in Decision Making
• Cross –Cultural Contradictions
Some of the knottiest ethical problems occur as
corporations do business in other societies
where ethical standards differ from those at
home
• Competitive Pressures
When companies are squeezed by severe
competition, managers sometimes engage in
unethical activities to beat out a competitors
 Difficulties in Decision Making

• Managers Values and Attributes

Managers are the key people to investigate
whether a company will act ethically or
unethically. As major decision makers and
policy makers, that have more opportunities
than others to set an ethical time for their
company
 Difficulties in Decision Making

• Individual values in conflict with organizational goals

Ethical conflicts in business frequently occur when a
company pursues goals or uses methods that are not
acceptable to some of its employees
 Difficulties in Decision Making
• Personal gain/Dubious Character
Personal gain or even greed, causes some ethical
problems. Business sometimes employs
people whose personal values are less than
desirable
 How to use Ethical Reasoning?
• Identify the nature of the ethical problem
• Decide which course of action is likely to
produce the most ethical results
Three methods
• Utilitarian
• Rights
• Justice
• Ethics of care
 Different Methods
Method Critical An action is Limitations
determining ethical when
factor

Utilitarian Comparing Net benefits Difficult to measure some human

benefits and exceed costs and social costs. Majority may
costs disregard rights of minority

Rights Respecting Basic human Difficult to balance conflicting rights

rights rights are
respected

Justice Distributing Benefits and cost Difficult to measure benefits and

fair shares are fairly costs. Lack of agreement on fair
distributed shares

Ethics of care Caring one Cares for Demand for caring are sometimes
relationships others leads to conflict and has to abide to
with others company policy and uphold
 AN ANALYTICAL APPROACH TO ETHICAL PROBLEMS

STEP 1

Ask

UTILITY RIGHTS JUSTICE

Do benefits exceed Are human rights Are benefits and costs
costs? respected? fairly distributed?
 AN ANALYTICAL APPROACH TO ETHICAL PROBLEMS

STEP 2

Compare results

If yes is the answer to all

three questions, it is If yes and no are mixed,
If no is the answer to all
probably ethical. it could be either ethical
three questions, it is
or unethical.
probably unethical.
 AN ANALYTICAL APPROACH TO ETHICAL PROBLEMS

STEP 3

ASSIGN PRIORITIES TO

UTILITY
RIGHTS JUSTICE
 Ethical Reasoning Process
Step 1: Define the problem.
Step 2: Know the relevant rules.
Step 3: Develop and evaluate courses of
action.
Step 4: Choose the course of action that best represents
Army values.
 Levels of Decision Making
• Levels of the individual
• Levels of the organization
• Levels of the business system
Kohlberg’s Seven Stages

Pre-Conventional Moral Development

 Stage 0
 Stage 1
 Stage 2
Conventional Moral Development
 Stage 3
 Stage 4
Post-Conventional Moral Development
 Stage 5
 Stage 6
 Stage 7
 Stage 0
At this stage, the individual:
• Avoids pain and seeks pleasure
• Has no sense of obligation to anyone else
• Is self-absorbed (unaware or anyone’s needs other
than those that are self-serving)
• Does what he/she wants to do
• Is amoral
• Is totally egocentric in assuming that the world
revolves around his/her needs and desires
• Has thus no sense of cause-effect
• Is typically between the ages of 0-7
 Stage 1
At this stage, the individual:
• Obeys rules in order to avoid punishment
• Determines a sense of right and wrong by what is punished
and what is not punished
• Obeys superior authority and allows that authority to make
the rules, especially if that authority has the power to
inflict pain
• Is responsive to rules that will affect his/her physical well-
being
• Is usually over the age of 7
 Stage 2
At this stage, the individual:
• Is motivated by vengeance or “an eye for an eye”
philosophy
• Is self-absorbed while assuming that he/she is generous
• Believes in equal sharing in that everyone gets the same,
regardless of need
• Believes that the end justifies the means
• Will do a favor only to get a favor
• Expects to be rewarded for every non-selfish deed
he/she does
• Is usually over the age of 10
 Stage 3
At this stage, the individual:
• Finds peer approval very important
• Makes moral decisions on the basis of what will please a
limited group and make the person feel included
• Thus models behavior on that of the “majority” which is
the behavior of the “in crowd” or peer group
• Feels that intensions are as important as deeds and expects
others to accept intentions or promises in place of deeds
• Begins to put himself/herself in another’s shoes and think
from another perspective
• May continue to be in this stage until him/her has reached
the 20s in age
 Stage 4
At this stage, the individual:
• Continues past actions and behaviors in tradition since the
maintenance of law and order is supremely important
• Is a duty doer who believes in rigid rules that should not
be changed
• Respects authority and obeys it without question
• Supports the rights of the majority or majority rule
without concern for those in the minority
• Is part of about 80% of the population that does not
progress past stage 4
 Stage 5
At this stage, the individual:
• Is motivated by the belief in the greatest amount of good
for the greatest number of people
• Believes in contracts in which both parties compromise and
yet both receive benefits
• Believes in consensus (everyone agrees), rather than in
majority rule
• Respects the rights of the minority especially the rights of
the individual
• Believes that change in the law is possible but only through
the system
• Has reached the same stage as the official morality of the
nation
 Stage 6
At this stage, the individual:
• Loses the ability to compromise high principles and thus may
forfeit his/her life in order to uphold them
• Believes that there are high moral principles than those
represented by social rules and customs
• Obeys these self-chosen high moral principles
• Is willing to accept the consequences for disobedience of the
social rule he/she has rejected
• Uses only passive resistance and has no use for violence in
any form
• Believes in granting justice and dignity to all human beings as
inalienable human rights
• Respects justice for its moral nature and its legal nature
• Believes that the dignity of humanity is sacred and that all
humans have value
 Stage 7
At this stage, the individual:
• Is a “seeker of justice in an unjust world”
• Has a cosmic perspective of life
• Neglects any consideration for self
• Focuses not on the individual but on the whole, a view of
self as part of the infinite whole and not as an individual part
that is significant
• Thus is plagued with despair and sees a world of woe that
he/she is inadequate to repair
• Possesses an altruism that is difficult for the world to
comprehend and consequently his/her forgiveness and
compassion often runs afoul of the world’s sense of justice
I.e. moral level
 7 step moral reasoning model
1. relevant facts
2. ethical issues - broad systemic, corporate and
personal issues
3. primary stakeholders affected by the ethical decision
4. possible alternatives
5. ethics of each alternative How will each affect
stakeholders? Apply the philosophies here
6. practical constraints that limit implementation
7. which alternative should be taken?
 Influences of Ethical Decision Making
• Work place ethics
• Nature of ethical issues
• Personal values and ethical decision making
1. Trustworthiness
2. Respect
3. Responsibility
4. Fairness
5. Caring
6. citizenship
 CONTINUED
• Corporate values and ethical Decision making
• Role of corporate governance in ensuring
ethics in work place
 Frame work of Ethical decision making
• Take choices seriously
• Good decisions are both ethical and effective
• Discernment and discipline
 PROCESS OF MAKING GOOD ETHICAL
DECISIONS
• Recognize and identify the kind of issue needed to
resolve
• Pause and think
• Make sure of goals
• Get your facts right
• Evaluate the choices from diferent ethical perspectives
• Consider consequences
• Make a decision
• Act, then reflect on the decision later
 Why use ethical reasoning in business?

• There are 3 reasons:

1. Many times laws do not cover all aspects or ‘gray areas’ of a

problem
E.g. tobacco industry.

2. Free market and regulated-market mechanisms do not effectively

inform owners and managers how to respond to complex issues
that have far-reaching ethical consequences

3. Complex moral problems require ‘an intuitive or learned

understanding and concern for fairness, justice, due process to
people, groups, human, and communities’. Ethics plays a role in
business because laws are many times insufficient or guide action.
Can business ethics be taught and trained?

• Because laws and legal enforcement are not

always sufficient to help guide or solve
complex human problems relating to business
situations, the questions arise:
– Can ethics help?
– If so, how?
– Can business ethics be taught?
 Cont…
• Decisions depend on:
– Facts
– Inferences and rigorous
– Ethical reasoning

• Ethics courses and training can do the following:

– Provide people with rationales, ideas, and vocabulary to help
them participate effectively in ethical decision making process
– Help people ‘make sense’ of their environments
– Enhance sensitivity to moral issues and commitment to finding
moral solutions
– Enhance moral reflectiveness and strengthen moral courage
– Improve the moral climate of firms by providing ethical
concepts and tools for creating ethical codes and social audits
 Quick test of your ethical beliefs
• Answer each following with your first
reaction. Circle the number, from 1 to 4, the
best represents your beliefs if
• 1 represents ‘completely agree’ and
• 4 represents ‘completely disagree’.
Answer each following with your first reaction. Circle the number, from 1 to 4, the best
represents your beliefs if
1 represents ‘completely agree’ and
4 represents ‘completely disagree’

1. I consider money to be the most important reason for 1 2 3 4

working at a job in an organisation.
2. I would hide truthful information about someone or 1 2 3 4
something at work to save my job
3. Lying is usually necessary to succeed in business 1 2 3 4
4. Cutthroat competition is part of getting ahead in the 1 2 3 4
business world
5. I would do what is needed to promote my own career in 1 2 3 4
a company, short of committing a serious crime
6. Acting ethically at home and with friends is not the 1 2 3 4
same as acting ethically on the job
7. Rules and for people who don’t really want to make it 1 2 3 4
to the top of a company
8. I believe that the ‘Golden Rule’ is that the person who 1 2 3 4
has the gold rules
9. Ethics should be taught at home and in the family, not 1 2 3 4
in professional or higher education
10 I consider myself the type of person who does whatever 1 2 3 4
. it takes to get a job done, period
Total Score
 ANSWER
Total your scores by adding up the numbers
you circled. The lowest possible score is 10,
the highest score is 40. Be ready to give
reasons for your answer.

THE LOWER YOU SCORE, THE MORE

QUESTIONNABLE YOUR ETHICAL PRINCIPLES
REGARDING BUSINESS ACTIVITIES
The reputation of a thousand years
may be determined by the conduct of
one hour.
Japanese
proverb