Business ethics ethical decision making and case 10e chapter 5

A Framework for Ethical Decision Making in Business In business, people make decisions differently than at home  Organizational pressures have a strong influence  The ethical decisio

Chapter 5 Ethical Decision

Making

Part Three The Decision Making Process

A Framework for Ethical Decision Making in Business

 In business, people make decisions

differently than at home

 Organizational pressures have a strong influence

 The ethical decision making process includes

 Ethical issue intensity

 Individual factors

 Organizational factors

 The framework for ethical decision making

does not describe how to make ethical decisions

 Outlines the factors and processes related to

Framework for Understanding Ethical Decision Making in Business

Intensity

The perceived relevance or

importance of an ethical issue to

the individual, work group, and/or

organization

 Reflects the ethical sensitivity of the

individual and/or work group

 Triggers the ethical decision making

process

person’s perception of social pressure and the harm his/her decision will

have on others

Factors

 People base their ethical decisions on

their own values and principles of right or wrong

 Values are learned through socialization

 Good personal values decrease unethical

behavior and increase positive work behavior

 Values are subjective; vary across

cultures

Factors

 An organization may intend to do

right, but organizational or social forces can alter this intent

 Research shows that various factors

influence ethical behavior

 Gender—women are more ethical than

men

 Education, work experience, nationality,

and age affect ethical decision making

Locus of Control

Relates to individual differences in

relation to a general belief about

how one is affected by internal

versus external events or

reinforcements

Locus of Control

 Managers with…

 External locus of control go with the

flow because that’s all they can do

 Internal locus of control believe they

can control events; are masters of their destinies and trust in their capacity to influence their environment

 Unclear relationship between locus of

control and ethical decision making

Factors

Organizational culture has a

stronger influence on employees

than individual values

norms, and artifacts that members of

an organization share

 Ethical culture: Reflects whether the

firm has an ethical conscience; is a function of many factors

Factors

influence in a work group

explain why many employees unquestioningly follow superior’s orders

The conditions in an organization

that limit/permit ethical/unethical

behavior

employees work, with whom they work, and the nature of the work

 Opportunities for misconduct can be

reduced by establishing formal codes, policies, and rules

 Aggressive enforcement is required

 Knowledge can sometimes lead to

unethical behavior

 A person who has an information base,

expertise, or information about

competition has an opportunity to

exploit knowledge

Most Common Office Supplies

Stolen by Employees

Source: “Top Office Supplies that Are Stolen and the Average Value of Contents In A Woman’s Purse!”

KMLE, May 16, 2012, http://kmle1079.cbslocal.com/2012/

stolen/

Business Ethics Intentions, Behaviors, and Evaluations

Ethical dilemmas involve situations

where rules are vague or in conflict

 Critical thinking skills and ability to

take responsibility are important

 The final step is deciding what action

to take based on a person’s intentions

 Guilt or uneasiness is the first sign

that an unethical decision has occurred

 Most businesspeople will make ethical

Using the Ethical Making Model to Improve

Decision-Ethical Decisions

Impossible to objectively determine if

a business decision is right or wrong

 Understanding how ethical decisions are

made will not solve ethical problems

 Business ethics involves value judgments

and collective agreement about acceptable patterns of behavior

 Ethical decision making in business does

not rely on personal values and morals

 Organizations take on cultures of their own

 Informal relationships enforce an ethical

 Normative approaches: How

organizational decision makers

should approach an issue

 Different from a descriptive approach

that examines how organizational

decision makers approach ethical decision making

 Concepts like fairness and justice are

highly important in a normative structure

Normative Considerations

in Ethical Decision

Making

 Most organizations develop a set of

core values to provide enduring beliefs about appropriate conduct

 Core values are central to an

organization and provide direction for action

 Institutions are important in

establishing a foundation for normative values

 Organizations face certain normative

pressures from different institutions

to act a certain way

 Internally and/or externally

 Sort institutions into three categories:

Political, economic, and social

Institutions as the Foundation for Normative

Values

 Political influences can take place

within the organization

 An ethical organization has policies

and rules in place to determine appropriate behavior

 Often the compliance component of

the firm’s organizational culture

 Failure to abide by these rules results in

disciplinary action

Institutions as the Foundation for Normative

Values

 Normative business ethics takes into

account the political realities outside the legal realm in the form of industry standards

 Legal issues such as price fixing,

antitrust issues, and consumer protection are important in

maintaining a fair and equitable marketplace

 These issues must be major

considerations for business when making

Institutions as the Foundation for Normative

Values

 Competition affects how a company

operates as well as the risks employees take for the good of the firm

 Amount of competition in an industry

can be determined/described according to…

 Barriers to entry into the industry

 Available substitutes for the products

produced by the industry rivals

 Power of the industry rivals over their

customers

Institutions as the Foundation for Normative

Values

 Social institutions include religion,

education, and individuals such as the family unit

 There are laws meant to ensure an

organization acts fairly, but there are

no laws saying people should do to others as they would prefer to have done to them

 Many cultures adopt this rule that has

been institutionalized into businesses with standards on competing fairly, being

Institutions as the Foundation for Normative

Values

 Industry shared values promote

organizational effectiveness when linked to goals

 Can also hinder effectiveness if more

efficient means of organization and structure are avoided in exchange for stability

 Risk that organizations might sacrifice

new ideas or methodologies in order to

be more acceptable

 Can limit innovativeness and productivity

 Important that organization does not

Institutions as the Foundation for Normative

Values

 When values from political, economic,

and social institutions are embedded into the organizational culture to

provide incentives for appropriate behavior, firms tend to act more socially responsible

 If incentives do not align with

institutional normative values or if they contradict these values, then misconduct is likely

Institutions as the Foundation for Normative

Values

 John Rawls was one of the most

influential philosophers in his research on how principles support the concept of justice

 Veil of ignorance: A thought

experiment that examined how individuals would formulate principles

if they did not know what their future position in society would be

 Identified principles that were not biased

Implementing Principles and Core Values in Ethical Decision

Making

Two main principles of justice…

 Liberty principle (equality principle):

States that each person has basic rights that are compatible to the basic liberties

of others

 Difference principle: States that

economic and social equalities (or inequalities) should be arranged to provide the most benefit to the least- advantaged members of society

 Does not advocate for the complete

elimination of inequalities in society

Implementing Principles and Core Values in Ethical Decision

Making

 Companies take basic principles and

translate them into core values

 Core values provide the abstract

ideals that are distinct from individual values and daily operational

procedures

 Value practices evolve and are

translated into normative definitions

of ethical or unethical

 Individual and organizational values

can differ significantly because of

Implementing Principles and Core Values in Ethical Decision

Making

 Leaders, stakeholders, and the

organizational culture impact the development of core values

 A firm’s core values provide a

blueprint into the firm’s purpose as well as how it views ethical decision making and prioritizes stakeholders

 Organizations that have ethics

programs based on a values orientation are found to make a greater contribution than those based

Implementing Principles and Core Values in Ethical Decision

Making

Principles and

Values

4 Act with Integrity

5 Serve Our World

Source: Marriott, 2011 Annual Report,

http://investor.shareholder

Understanding Ethical

Decision Making

Ethical issue intensity, individual factors, and opportunity result in business ethics evaluations and decisions

 An organizational ethical culture is shaped

by effective leadership

 Top level support is required for ethical behavior

 An ethical corporate culture needs shared

values and proper oversight

 The more you know about ethical decision

making, the more likely you will be to make good decisions