Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Chapter 11

Ethical Decision Making

in Business

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Models that Guide
Decision Making

1. Rights Theories: These were advocated by

Immanuel Kant and Locke and based on the view
that ethical decisions should protect the legal and
moral rights that an individual is entitled to.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Models that Guide
Decision Making (contd.)

2. Justice Theories: These were originally advocated by

Greek philosophers and more recently by Rawl, and is
based on the view that ethical decisions should result in
a situation where all human beings are treated equally,
and in case some are treated unequally, it must be
based on some defensible reasons.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Models that Guide
Decision Making (contd.)

3. Utilitarianism: Advocated by Adam Smith, David

Ricardo, Jeremy Benthem and John Stuart Mill, this
theory employs a teleological approach to ethics and
asserts that behaviour or actions should be evaluated
in terms of their consequences.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Models that Guide
Decision Making (contd.)

4. The Virtue Approach: It advocates that ethical

actions should be consistent with certain morally
acceptable virtues that would pave the way for full
development of humanity.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Models that Guide
Decision Making (contd.)

5. The Common Good Approach: It underlines the

societal view that life in a community is good in itself
and that it is every person’s moral responsibility not
only to contribute, but also to enrich it.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethical Decision Making with Cross-holder
Conflicts and Competition

Barry proposed the following decision making rules regarding

cases of conflicts and mixed effects:
•Choose the more important obligation between two or more
conflicting obligations
•Choose an action of higher ideal when two or more ideals
conflict or when ideals conflict with obligations.
•Choose the action that produces the greater good, or the
lesser harm, when the effects are mixed.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Kohlberg’s Model of Cognitive Moral
Development

Kolberg’s six stage model of cognitive development explains

why people make different decisions in similar ethical
situations.

1.The stage of punishment and obedience

2.The stage of individual instrumental purpose and exchange
3.The stage of mutual interpersonal expectations,
relationships and conformity
4.The stage of social system and conscience maintenance
5.The stage of prior rights, social contract or utility
6.The stage of universal ethical principles

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Influences on Ethical Decision Making

There are three major influences that have an impact on an

employee’s decision making in business—his personal moral
standards, his workplace ethics and culture, and the nature
of the issue concerned.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Personal Values and Ethical Decision Making

For an individual to be considered as an ethical decision

maker, he needs to build and develop certain values.

The Josephson Institute of Ethics proposed the following Six

Pillars of Character:

1.Trustworthiness
2.Respect
3.Responsibility
4.Fairness
5.Caring and
6.Citizenship

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Corporate Values and Ethical Decision Making

A corporate culture can be defined as “a set of values,

beliefs, goals, norms and ways of solving problems” that an
organization’s employees share and live up with in their
work environment. It involves certain prescriptions of
behaviour the organization’s employees are expected to
follow.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
A Framework of
Ethical Decision Making

Michael Josephson has constructed the following components of

good choices:

1. Take Choices Seriously

2. Good Decisions are both Ethical and Effective
3. Discernment and Discipline

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making
Good Ethical Decisions

The process one has to follow to make good ethical decisions

is:
1.Recognize and identify the kind of ethical issue you
need to resolve
Recognize the ethical issue, seek answers to questions such
as the nature of the issue, the conflict it has raised and how
the decision would impact the larger community.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

2. Pause and Think

Pause for sometime on the ethical issue; think ahead,
reflect on the consequences that are likely to follow.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

3. Make Sure of Your Goals

Be clear on goals, both short-term and long-term, weigh
options clearly

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

4. Get Your Facts Right

• Gather all facts concerning the issue
• Verify the uncertain facts
• Get additional information

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

5. Evaluate choices from Different Ethical Perspectives

•Make a list of options that attempts to accomplish the goal.
•Test each option against various ethical perspectives such
as rights, justice, virtue or common good
•Find out which option will produce the most good and do
the least harm to others.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

6. Consider the Consequences

• Ensure that there is no unethical option
• See that your option is consistent with all core ethical
values
• Analyze the possible consequences of each of the options
for each stakeholder
• Ensure that the end result causes more good than any
harm

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

•Identify the stakeholders who are likely to be impacted by

the decision
•Find out what important stakes individuals and groups
have, in the outcome
•Find out whether some individuals have a greater stake
because they have a special need or because we have
special obligations to them.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

7.Make a Decision
Prepare a criteria derived from the facts gathered.
Create a decision criterion including the financial outcome, if
any.
Rate the appropriate action against your list of criteria.
Talk to a person whose judgment you respect.

Business Ethics and Corporate Governance, 2e A. C. Fernando

 Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
The Process of Making Good Ethical Decisions
(Contd.)

8. Act, then Reflect on the Decision Later

• Implement the decision
• Evaluate the consequences.

Business Ethics and Corporate Governance, 2e A. C. Fernando