Ethical Decision Making

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Perspective around business ethics

n What is? n Descriptive ethics: describing, characterizing and studying ethics of people, culture, society
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What is your personal / organisational / cultural / societal ethics?

n What ought to be? n Normative ethics: supplying and justifying a coherent ethical system of thinking and judging

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Source : Otto Bremer

Perspective around business ethics

n How to get from what is to what ought to be?
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The practical question Find the balance between what we ought to do with what we must or can do n What is the ethical problem? n What ought to be done, or where we want to be? n Managerial challenge of closing the gap A question of authencity. n Messy world of mixed motives n At best, manager can design structures that accomodates right behavior
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n What is our motivation?

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Source : Otto Bremer

Ethics vs values
n Ethics: ethics involves learning what is right or wrong, and

then doing the right thing n Ethics: consists of those unwritten rules we have developed for our interactions with each other. n Ethics consists of standards and norms of behavior that are beyond laws and legal rights.
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Eg, line cutting vs traffic rule violation

n Morality difference between good and evil Beliefs: what is known about the world Values: what should be and what is desirable

KM, 2013, IIMIDR

Ethical Dilemma Sales Head

n Youre a middle manager in a company with about a

thousand employees. Youre negotiating a contract with a potentially very large customer whose representative has hinted that you could almost certainly be assured of getting his business if you gave him and his wife an all-expense-paid cruise to the Caribbean. You know the representatives employer wouldnt approve of such a payoff, but you have the discretion to authorize such expenditure. What would you do?
You? Who gets impacted? What is the organisational setting?
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What choice does he have (opportunity for action)? KM, 2013, IIMIDR

Ethical Dilemma Fact or Fiction?

n You work for a company that manufactures, markets, and

distributes various products, including nutritional supplements, to health food and nutrition stores. One of the companys best-selling products is Chyawanlife, a herbal supplement. The company advertises that Chyawanlife increases energy and helps maintain vitality without any side effects. One day, a research assistant stops by your office with some troubling information. While researching another product, she came across a recent study that suggests Chyawanlife does not offer the benefits the company claims it does. You show this study to your supervisor, who says, Were not responsible for validating over-the-counter drugs, and nobodys hurt anyway. Indeed, you know this is not the case. What is your ethical KM, 2013, IIMIDR 6 responsibility?

Ethical Dilemma
n Are unethical decisions more a function of an

individual decision maker or the decision makers work environment? n Is business ethics a matter of dealing with dilemmas that have no clear indication of what is right or wrong? n Do every ethical dilemma has a right solution? n Managers can agree on a process for dealing with dilemmas

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Ethical Decision-Making Criteria Assessed

n Divine commandment n Ethical egoism n act in our self interest n Categorical Imperative; n You cannot use others such that it gives you one-sided benefit everyone must operate under same usage rules n You not only have to be fair; you have to want to do it for all the right reasons
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Ethical Decision-Making Criteria Assessed

n Utilitarianism: greatest good to greatest no of

people
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Pro: Promotes efficiency and productivity Con: Can ignore individual rights, especially minorities

n Rights: everyone has a set of rights and it is upto

the government to protect those rights

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Pro: Protects individuals from harm; preserves rights Con: Creates an overly legalistic work environment

n Justice: social contract that will operate if there

were no rules at all

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Pro: Protects the interests of weaker members KM, 2013, IIMIDR Con: Encourages a sense of entitlement

Ethical Decision-Making Criteria Assessed

n Moral Relativists:
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Time and place ethics weighing the competing factors at the moment and then making a determination to take the lesser of the evils as the resolution

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Moderating effects of four constructs

n Model containing four constructs which affect

ethical decision making through their moderating effects on perceived ethical problems, perceived alternatives, philosophical evaluations, ethical judgements and intentions:
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Personal experience Organisational norms Industry norms Cultural norms

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Source: Ferrel and Gresham, 1985

Principal antecedents of ethical decision making

n Individual factors
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Actual cognitive map of the individual and his value system. Choose the stronger ideal of yours.. Who are the stakeholders? Who gets hurt? Choose the action that produces greater good.. Environment which promotes or hinders ethical action: way of doing business, policies and procedures

n Impact on people
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n Organisational setting (cultural, industry setting..)

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n Opportunity for action

The occasions, if at all present, when the individual can act unethically: Choose the stronger KM, 2013, IIMIDR obligation, short term vs long 12 Printed Caselets term business impact.. Source: Ferrel and Gresham, 1985
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Individual characteristics
n Personal value system n The Absolute Line

The Moving Line Exercise

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Organizational Constraints to ethical decision making

n Performance Evaluation n

n n n

Managerial evaluation criteria influence actions Reward Systems n Managers will make the decision with the greatest personal payoff for them Formal Regulations n Limit the alternative choices of decision makers System-Imposed Time Constraints n Restrict ability to gather or evaluate information Historical Precedents n Past decisions influence current decisions
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Some simple tests for resolving ethical dilemma

n Peter Drucker: n Above all, do no harm n Laura Nash, Harvard Divinity School
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Have you defined the problem accurately? How would you define the problem if you stood on the other side of the fence? How did this situation occur in the first place? To whom and what do you give your loyalities as a person and as a member of an organisation? What is your intention in making this decision? How does this intention compare with likely KM, 2013, IIMIDR 15 results?

Some simple tests for resolving ethical dilemma

n Laura Nash, Harvard Divinity School (contd)
n n n n

n n

Whom could your decision or action injure? Can you engage the affected parties in a discussion of the problem before you make your decision? Are you confident that your position will be as valid over a long period of time as it seems now? Could you disclose without qualm your decision or action to your boss, your CEO, your BOD, your family or society as a whole? What is the symbolic potential of your action if understood? If misunderstood? Under what conditions would you allow exceptions to KM, 2013, IIMIDR 16 your stand?

Some simple tests for resolving ethical dilemma

n Does it violate the obvious shall nots? n Will anyone get hurt? n How would you feel if the newspaper reported

your decision on the front page? n What if you did it 100 times? n How would you feel if some one did it to you? n What is your gut feeling?

Source: Greenberg J & Baron RA; 2000; Behavior in Organizations; Prentice-Hall NJ. KM, 2013, IIMIDR

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Does Business Ethics reward?

n Keeping up with others joining the bandwagon. n Response to pressure from civil society and irritating

pressure groups n Prospect of profit in long term

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In case there is ethics dividend, it has to be earned through set-up or recurring costs in time and resources and possibly in terms of opportunity costs

n People involved consider it simply the right thing to do

not because it is fashionable or profitable or makes for a quite life

Treating people with honesty, fairness & respect is a matter of moral principle, not of expediency n Striking the right balance between KM, 2013, IIMIDR two basic human feelings 18 concern for ones own self and concern for others
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