J Bus Ethics (2011) 104:311323
DOI 10.1007/s10551-011-0910-1
A Model for Ethical Decision Making in Business: Reasoning,
Intuition, and Rational Moral Principles
Jaana Woiceshyn
Received: 11 February 2011 / Accepted: 16 May 2011 / Published online: 28 May 2011
 Springer Science+Business Media B.V. 2011
Abstract How do business leaders make ethical deci-
sions? Given the significant and wide-spread impact of
business peoples decisions on multiple constituents
(e.g., customers, employees, shareholders, competitors, and
suppliers), how they make decisions matters. Unethical
decisions harm the decision makers themselves as well as
others, whereas ethical decisions have the opposite effect.
Based on data from a study on strategic decision making by
16 effective chief executive officers (and three not-so-
effective ones as contrast), I propose a model for ethical
decision making in business in which reasoning (conscious
processing) and intuition (subconscious processing) inter-
act through forming, recalling, and applying moral princi-
ples necessary for long-term success in business. Following
the CEOs in the study, I employ a relatively new theory,
rational egoism, as the substantive content of the model
and argue it to be consistent with the requirements of long-
term business success. Besides explaining the processes of
forming and applying principles (integration by essentials
and spiraling), I briefly describe rational egoism and
illustrate the model with a contemporary moral dilemma of
downsizing. I conclude with implications for further
research and ethical decision making in business.
Keywords Ethical decision making
Integration
by essentials
Intuition
Moral principles

Rational egoism
Reason
J. Woiceshyn (&)
Haskayne School of Business, University of Calgary,
2500 University Dr. NW, Calgary, AB T2N 1N4, Canada
e-mail: woiceshy@ucalgary.ca
Introduction
Whether people make decisions ethically or not is not a
trivial matter, as the outcome of those decisions can make a
significant difference to their lives and to the lives of
others. For example, they can choose to be honest with
themselves and others or not. They can pretend that their
business is doing well when, in fact, it is losing money or
they can face the facts and try to save the business. Or they
can defraud their customers like Bernie Madoff did or deal
with them honestly like many other business people do.
Honesty is just one moral principle, but these examples
alone illustrate the significance of ethical decisions. The
better we understand how people make ethical decisions,
the better we are equipped to make such decisions and to
affect their outcomes.
Ethicalor unethicaldecisions in a business context
can have particularly far-reaching implications, as business
involves many transactions and relationships with so many
people, including shareholders, employees, suppliers, and
customers. Consider the implications of the decision by the
young Arthur Andersen to refuse the demands by the
management of a large client, a railroad company, to
overlook misrepresentations in the companys financial
statements. Andersen maintained his integrity and stood
firm against bribes and threats, resolved not to mislead the
clients shareholders, and went on to build one of the most
successful accounting firms for a long time. The railroad
later went bankrupt (Toffler 2003).
Or take the decision by the CEO of Steelcase, Jim
Hackett, to extend the use of fire retardant material to their
office wall panel product even when it was not required by
fire codes or demanded by customersto deliver on a
promise that all Steelcase products would be fire retardant.
This same product was used in the office walls at the
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Pentagonwith the consequence of significantly less
damage to structures and loss of life when the September
11 terrorist attacks happened in 2001 (Tichy and Bennis
2007, p. 83). As examples of unethical decisions and their
destructive consequences, consider Bernie Madoffs and
other pyramid schemers frauds, or the decisions of the
Chinese baby formula and pet food manufacturers to cut
corners in order to save money.
Due to the far-reaching implications of ethical, or
unethical, decisions in business, the processes by which
business people and executives make decisions are worth
examining, in order to discover whether and how those
decision processes affect their outcomes. And it seems that
empirical research on ethical decision making in business
is flourishing. OFallon and Butterfield (2005) report 174
studies published in the top 22 business journals in the
8-year period between 1996 and 2003, more than 20 arti-
cles a year, on average. More recently, there has been an
increasing interest in the role of intuition in ethical decision
making (Sonenshein 2007) and in the way the brain func-
tions during ethical decision making. These articles
examine how business people make ethical decisions (or
how their brains function during such decisions), with the
purpose of understanding and predicting ethical decision
making in business. This literature will be reviewed
shortly.
The motivation for this paper arose from an empirical
study of strategic decision making of chief executive offi-
cers (Woiceshyn 2009). The CEOs in the study employed a
dual process involving reasoning and intuition, the crucial
element of which was integration by essentials that
yielded principles applied in subsequent decision making.
During the decision process, the participants identified and
applied not just principles of strategy but ethical principles
in an iterative spiraling process involving both conscious
reasoning and subconscious processing (intuition). That
study suggested that individual managers employ the same
processes when making decisions involving ethics as they
do for any long-term decisions affecting their companies.
The moral principles that the studys effective CEOs
applied were consistent with a relatively new ethical the-
ory, rational egoism. The purpose of this paper is to pro-
pose an integrated dual processing model for ethical
decision making with rational egoism as its substantive
component, based on the above study on strategic decision
making.
I will first review the literature on ethical decision
making, with a particular focus on the dual processing
model which depicts ethical decision making as consisting
of both conscious reasoning and subconscious, intuitive
processing. As the relationship between reasoning and
intuitive, subconscious processing has not been studied
much, I will draw from the empirical study of strategic
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J. Woiceshyn
decision making to propose an integrated dual processing
model for ethical decisions, with a focus on the interaction
between the two processes. Following the CEOs in the
study, I employ rational egoism as the substantive ethical
component in the proposed ethical decision making model.
Rational egoism is explained briefly, followed by an
illustration as to how the proposed decision model com-
bined with egoist principles applies to a contemporary
business ethics dilemma. Finally, the paper summarizes its
contribution to the dual processing model of ethical deci-
sion making and proposes a new moral code for business
managers tool kit for long-term business success.
Research on Ethical Decision Making: Rational,
Intuitionist, and Dual Processing Models
Kohlbergs (1973) description of ethical decision making
as a rational process, where people reason through moral
dilemmas by applying moral principles or some other cri-
teria, set the stage for research on ethical decision making
for a while. In his review of the literature, Sonenshein
(2007) distinguishes three types of rational ethical decision
making models. Some of the rational models assume that
managers engage in reasoning based on moral theories,
such as deontology or utilitarianism, and then act according
to the principles of these theories (such as truth-telling as a
duty, as per deontology, or benefit to the majority in util-
itarianism) (Hunt and Vitell 1984). Other rational models
propose that rather than on the basis of moral theory,
managers reason according to the stage of their moral
development, or on the basis of rewards and sanctions
(Trevino and Youngblood 1990). The third type of rea-
soning models are based on moral intensity: people
respond to ethical issues on the basis of differences in the
consequences (impact on victims or beneficiaries), con-
sensus about the good or evil of the proposed act, the
probability of effect, its temporal immediacy and proximity
to its victims or beneficiaries, and other components of
moral intensity (Jones 1991).
In terms of the actual decision process, Rests (1986)
model has been particularly influential. It describes ethical
decision making as consisting of four generic steps: iden-
tifying the moral issue, making a moral judgment, estab-
lishing moral intent, and engaging in moral action. Most of
the studies generally validate this model and test the impact
of a wide variety of factors on the decision process. Factors
qua individual include gender and stage of moral devel-
opment; organizational factors that have been studied are
codes of ethics, magnitude of consequences and social
consensus. Of the individual factors, gender, ethical phi-
losophy (such as universalism and relativism), locus of
control, and religion most consistently showed a direct
A Model for Ethical Decision Making
effect on ethical decision making (or at least on one of the
stages of Rests model). Although organizational factors
were studied less than individual ones, codes of ethics,
ethical culture, and rewards and punishments were most
consistently linked to ethical decision making (OFallon
and Butterfield 2005).
Not all research has confirmed ethical decision making
as a rational process. Some studies have found that decision
makers do not engage in a priori ethical reasoning but
rather make sense of their decisions after the fact (Haidt
2001), including business decision makers (Sonenshein
2007). These studies propose intuitionist decision models,
according to which decision makers do not engage in moral
reasoning but process decisions intuitively outside of that the model it yielded is applicable to ethical decisions
conscious awareness, and only construct rationalizations
for their moral judgments afterward for the purposes of
appearance or social approval (Haidt 2001; Haidt and
Bjorklund 2008). Alternatively, decision makers engage in
post hoc collective sense-making to justify decisions
(Sonenshein 2007).
Following the developments in cognitive neuroscience
and neuroethics (Salvador and Folger 2009) and parallel-
ing the general decision making literature (Dane and
Pratt 2007), most researchers have since come to hold a
so-called dual processing model of ethical decision mak-
ing. According to this model, decision makers in various
fields rely on two modes of processing. One is automatic,
subconscious, and intuitive (Haidt 2001; Khatri and Ng
2000; Dane and Pratt 2007), labeled as pattern recognition
by some (Klein 2001) or the (reflexive) X-System
(Lieberman et al. 2002). The other mode is higher order
conscious reasoning (Reynolds 2006), termed the (reflec-
tive) C-System (Lieberman et al. 2002). The automatic,
subconscious, and intuitive processing has received atten-
tion from researchers as a means to expedite decision
making in complex situations under time pressurewhich
is often the context of ethical dilemmas as well. Some
researchers suggest that intuitive processing plays a dom-
inant role in decision making, supported by rational anal-
ysis (Klein 2003), whereas others view the X-System and
the C-System as more or less equal partners (Pondy filing system, the subordinate will store and retrieve
1983; Reynolds 2006; Simon 1987).
How the two systems or modes of processing interact
has been studied relatively little by decision researchers.
Some conclude that one or the other system dominates,
depending on the situation (Cushman et al. 2006; Son-
enshein 2007). For example, Sonenshein (2007) suggests
that the reasoning mode may be dominant with novice
decision makers in conditions of low uncertainty. However,
the actual relationship between reasoning and intuition has
not been studied much. This is where the study of strategic
decision making by chief executive officers (Woiceshyn
2009) sheds some light.
313
Cognitive Interplay Between Reasoning and Intuition:
How CEOs Make Decisions
In a study of strategic decision making, 19 oil company
CEOs were asked to read through a realistic scenario and
think-out-loud which strategic alternative they would
choose and why. (For more details on the studys meth-
odology and findings, see the Appendix and Woiceshyn
2009.) This process and the subsequent interviews by the
researcher revealed a decision making pattern consisting of
three elements: (1) integration by essentials, (2) use of
principles, and (3) spiraling. Although the study was not on
ethical decision making per se, there are reasons to think
as well. First, the CEO participants of the study applied
certain moral principles to a decision making scenario and
when discussing how they make decisions in general.
Second, they had arrived at these principles through the
same process as with other principles, by integrating what
was essential to long-term success in business. Let us look
at the three elements of the decision making model and
specifically relate them to ethical decisions.
How Reasoning and Intuition Interact: Integration
by Essentials1
Neuro-cognitive research indicates that the relationship
between the conscious, reasoning mind, and intuition is
that of a manager and a subordinate (Reynolds 2006). The
conscious mind is like a manager who is in charge of
acquiring knowledgevast amounts of it is required for
making effective decisions. The conscious mind cannot
hold all the knowledge in focal awareness simultaneously
and therefore delegates the storing and retrieving of
information to a subordinate, which is the subconscious
(intuition). If the manager is disorganized and fails to give
proper instructions, new knowledge gets filed randomly,
mislabeled, or ends up with no labeling at all, therefore
being difficult to find when needed to make decisions. If,
on the other hand, the manager has a logically organized
knowledge much more effectively. How the conscious
mind integrates the newly acquired knowledge governs the
subconscious filing and retrieval process (Binswanger
1995). I propose that integration by essentials is central to
the storing and retrieval of knowledge, and thus to effective
decision making.
Human cognition is based on mental integration; our
forming and using of conceptsand thus our ability to
think and actdepends on it. First-order integrations are of
1
This section closely follows the presentation of integration by
essentials in Woiceshyn (2009).
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perceptual data to form concepts. We perceive individual
trees, people, and tables, and integrate them into concepts
tree, man, and table. For example, when we teristic of humans, it is easy for him to file new information
observe several pieces of furniture with a flat surface
supported by legs and that are used to holding objects, we
integrate them into a concept table (Rand 1990, pp. 11 rationality, he is equipped with integrated knowledge that
12). The definition of the concept table is like a mental
file folder: it holds all our knowledge about tables. We file
information about things that belong to the same class into
a mental file folder, in order to recall it quickly when we
encounter a new item that belongs to that class, such as a
new kind of table. The recalled knowledge guides our
action, for example, by telling how to put to use a new
table we encounter.
The second-order integrations are increasingly abstract.
Instead of integrating perceptual entities into concepts,
they involve integrating first-level concepts into more
abstract ones, such as furniture and man-made objects
(Rand 1990, pp. 2223). The highest level of integration
involves integrating concepts into principles (and making
inferences from one area of knowledge into another), such
as: when designing furniture, form should follow function.
The purpose of these higher order integrations into more
abstract concepts and principles is the same as with inte-
grating perceptual data into concepts: condensing infor-
mation so that it can be stored more easily and recalled
rapidly when needed.
Integration of perceptual data into first-level concepts
and first-level concepts into more abstract concepts and
principles is not an automatic process; people vary in the
extent and how they do it. We can also make mistakes in
integrating knowledge, for example, through logical falla-
cies that lead to invalid concepts (e.g., grue, an unnec-
essary concept, denoting blue-green color) and invalid
principles (e.g., Speak only in abstractions as a principle
of public speaking would hamper an audiences ability to
grasp the speakers message, for the lack of concrete
examples). In order for thinking and decision making to be
effective, proper integration is necessary and it should be
done by essentials. Integration by essentials requires
identifying the essence of whatever one is observing
(Harung 1993). The essence of a thing or phenomenon is
its most fundamental characteristic that gives rise to and
makes possible its other characteristics (Rand 1990, p. 45).
For example, mans ability to use reason, which governs all
the rest of his qualities, such as the ability to speak, or to
design and build furniture, or to run a business firm, is his
most fundamental characteristic. Aristotles definition of
man as a rational animal is based on this fundamental
characteristic (Peikoff 1991, pp. 99100).
If knowledge is integrated into concepts and principles
based on essences, the subconscious filing and retrieving of
it will be fast and accurate, facilitating effective decision
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J. Woiceshyn
making. For example, once a manager has grasped the
concept of rationality and that it is the essential charac-
he encounters about rational versus irrational people and
behaviors. And once he has grasped the principle of
he can quickly recall when making decisions regarding
hiring employees, choosing business partners and inves-
tors, and finding suppliers. He knows that dealing with
people who are principally rational will profit him, and
dealing with those who display various forms of irratio-
nality (e.g., evasion of facts, non-productivity, dishonesty,
injustice, etc.) will harm him. If, on the other hand, the
manager were to file information about people on the basis
of having first met them on a sunny versus a rainy day
which is a non-essential characteristichis decision mak-
ing would be hampered. Note also that it is much more
difficult to retain non-essential information than essential
information. One hardly remembers whether it rained or
shined when one first met someone; it is much easier to
remember whether the person conducts himself in pri-
marily rational or irrational ways.
Guiding Principles from Integration by Essentials
Integration of knowledge by essentials makes filing and
retrieving information more efficacious and provides deci-
sion makers an invaluable tool: guiding principles (Oliver
and Roos 2005; Locke 2002). Principles are the broadest of
integrations: based on essences of things (such as rationality
as the essential characteristic of man), they uncover causal
relationships that apply to a range of specific situations (for
example, that using reason leads to positive outcomes in
hiring people, in diagnosing illness, in solving engineering
problems, etc.). Principles are generalizations drawn from
past experience or present observations on achieving goals.
There are guiding principles in every field of human
endeavor (Peikoff 1989), such as irrigate the soil regularly
to maximize crops in agriculture, motivate the audience
in public speaking, and honesty in ethics.
We need principles because the human capacity to retain
knowledge in conscious awareness is limited, yet we
require significant amounts of knowledge to make complex
decisions and engage in long-range planning. Principles
condense vast amounts of knowledgesuch as accumu-
lated experience about growing food cropsinto a brief
statement, for example, irrigate the soil regularly. This is
easy to retain or retrieve when making farming decisions.
A principle such as this is a mental space-saver: it elimi-
nates the need to store specific reminders to irrigate dif-
ferent plants in different locations. The principle also
integrates specific knowledge which it helps to recall when
needed (Peikoff 1989).
A Model for Ethical Decision Making
Principles have two functions: in guiding decision
makers through complex choices to reach long-term goals,
they help to project the future and to choose between
concrete alternatives (Peikoff 1989). The principles of
agriculture, for example, help project the long-term con-
sequences of various agricultural practices, as well as to
decide what to do with any particular crop. A faster way of
harvesting would be rejected if it harmed the soil, making
future harvests impossible. A farmer would also know to
cultivate the soil before planting and irrigate regularly,
whether he is growing wheat or corn, or any other crop.
The principles of public speaking help project the effects of
various choices regarding a speech (e.g., what examples to
give, how to use humor, how long the speech should be,
etc.) and decide how to handle any given topic and audi-
ence in order to communicate ones message.
Moral principles are like any others: if they are valid
(i.e., based on observation of facts and integration by
essentials), they help to see the long-term consequences of
both moral and immoral actions (e.g., what happens if one
acts honestly vs. dishonestly), and choose in any specific
situation what to do (e.g., should one lie about ones
qualifications in a job interview or not).2
Based on the findings of the study of decision making by
CEOs (Woiceshyn 2009), the process of arriving at prin-
ciples of actionintegration by essentialsapplied to all
kinds of principles, including moral principles. For exam-
ple, the CEO participants of the decision making study
identified and applied a reality principle and a value cre-
ation principle as essential to the long-term profitability of
business. The reality principle emphasizes the focus on
facts, as opposed to wishful thinking or following others
blindly, as the basis of decisions. The value creation
principle emphasizes the production of material values that
customers are willing to pay for more than competitors
offerings. It is based on a number of mid-range principles
that make value creation possible (e.g., managing risk that
could threaten value creation; exploiting comparative
advantage so as to outperform competitors; aligning a
companys resources and capabilities with its strategy so as
to ensure effective implementation of the strategy). Other,
explicitly moral, principles also arose from the study. For
example, the CEOs used the principles of justice, honesty,
and rational self-interest.
2
This point is controversial as ethicists have not been able agree that
there is a factual basis of moral principles. In contrast to most
philosophers, there are some who start from the naturalistic premise
that facts about human nature give rise to the need of ethics; that
humans need to act according to the requirements of their nature in
order to survive and flourish (Foot 2001; Gaut 1997; Hursthouse
1999). Continuing on that premise, others have argued that ethics is
like any other science, and that facts can validate moral principles in
the same way as they validate or invalidate any other kind of
principles (Simpson 2009; Smith 2006).
315
By justice, the CEOs in the decision making study
meant evaluating and treating othersand themselves
objectively, such as: hiring the best people possible and
rewarding them accordingly, providing honest criticism,
terminating non-performers, being accountable for ones
own actions, and taking deserved credit. Honesty for the
studys participants was not merely about not lying to
others but not faking reality (such as pretending that a
situation is different than it actually is) when pursuing
values. Self-interest as a principle also came up frequently
during interviews. By self-interest, the CEOs understood
pursuing their values and not putting others first, and taking
a holistic, long-term perspective to the performance of their
companies as opposed to maximizing profits on the short-
term through any means with which they could get away.
The emphasis on long-term self-interest by the CEOs of
the studywho had been nominated as good minds, or
effective thinkers, by their peers and industry observers
suggested an alignment of the CEOs moral principles with
a relatively new ethical theory, rational egoism. Since the
effective CEOs, who had been running successful compa-
nies for a long time, consistently applied the principle of
self-interest and the other moral principles consistent with
egoism, I examine below the suggested connection
between rational egoism and long-term success in business.
Rational Egoism and Business Success
Rational egoism has not received much attention in the
business ethics literature (Locke 2006; for an exception,
see Maitland 2002) and is not to be confused with cynical
exploitation of others, which serves no-ones self-interest
with its Do unto others before they do to you-approach
(e.g., Ferrell et al. 2005, p. 97; DesJardins 2006, p. 27). My
presentation on rational egoism (egoism from here on) is
based on Rand (1964), Peikoff (1991), and Smith (2006),
unless otherwise cited.
Egoism starts from the premise that ethics is a necessary
guide to life; it shares the view of the ancient Greek phi-
losophers (Socrates, Plato and Aristotle) that ethics is not
merely a guide to physical survival but to the good life.
This is also consistent with a common sense view of ethics
as a guide to living and prospering, without harming others
(Donaldson and Dunfee 1994). Ethics, in the egoist view,
shows us how to flourish and live a happy life. However,
we dont have automatic knowledge as to which goals are
good for us to pursue or how to achieve them. Yet, if we
did not pursue any goals, or pursued wrong goals, we
would die. In the absence of automatic knowledge of the
right goals and means, we could choose to act in ways that
lead to destructive consequencesultimately, death, or
failure of our businesswithout realizing them at the
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outset. We could invest our money with a con man, lie to
our customers about product safety, abuse drugs, or eat
poison. The moral code of egoism, which consists of a set
of principles that promote long-term self-interest, such as
honesty and justice, would point out the harmful conse-
quences of such actions.
Unlike cynical egoism, rational egoism is not subjective.
Self-interest does not entail doing whatever one feels like.
Quite the contrary, egoism is based on the premise that
humans have a specific nature which requires specific
action to survive (Foot 2001; Hursthouse 1999). Humans
have specific requirements for physical survival: we need
food, water, shelter, clothing, medicineand many other
values beyond these in order to flourish and to enjoy life.
There are also many things that are harmful to us and
hinder survival or flourishing, such as poison, arbitrary
confinement, illness, crime, or initiating physical force
against others. In egoism, mans life is the standard of
value: that which enhances or benefits human life is the
good; that which harms or negates it, is eviland such
actions can be objectively determined through observation
and logic. Driving while intoxicated, pursuing Ponzi
schemes, or misrepresenting the companys financial situ-
ation in order to borrow money fall into category of
immoral actions, as they are destructive to human life
both to the perpetrators and the victims. Productive work,
honest dealing, and trading value for value are all moral
actions, as they contribute to a flourishing human life.
An egoist is often depicted as a ruthless brute who does
not hesitate to trample on others in order to get what he
wants. However, egoism is not predatorypreying on oth-
ers is not in ones self-interest. Obviously, predation is not in
the interest of the victims, but it is not in the self-interest of
the perpetrator, either. Even if cheating and stealing from
others can bring the perpetrator some temporary benefits
in the form of loot, his continued frauds will undermine his
victims ability to produceand eventually, there will be
very little, or nothing, to steal. Or, others would reciprocate
and treat the predator the same way he treats others. Instead
of such an adversarial view, egoism holds that peoples
rational interests do not conflict. People competing for the
same valuessuch as candidates for the same job, or busi-
nesses for the same customerare not harmed by the
competition, even if they lose in any particular round. If
an employer is rational and hires the better candidate for the
job, the candidate who lost in the competition is better off.
The better candidate is more productive in the job he got,
which means more wealth generation, more trade and more
jobs, and thus more opportunities to the candidate who
lost. The same argument applies to businesses competing
for the same customers (Simpson 2009).
Business firms must pursue their owners self-interest:
long-term profit maximization, if they are to survive and
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J. Woiceshyn
flourish (Jensen 2002). To ask a business firm to pursue any
other fundamental goal would be equivalent to ask it to
declare bankruptcy and to cease to exist. Therefore, it was
not surprising that the CEOs in the decision making study
were focused on the pursuit of self-interest of their firms
and had induced some virtues of rational egoism that they
used to guide their decision and actions. To give a com-
plete picture as to what kind of guidance egoism offers
business, the virtues of egoism are briefly discussed next.
Virtues of Egoism
Egoism has one primary virtueprimary in the sense that
each persons life literally depends on it and that the rest of
the virtues are all derived from it: rationality. It guides a
person to adhere to reality by the means of reason, i.e.,
observation and logic (Rand 1964, pp. 2526). Egoism is
based on the premise that reason is mans main means of
survival: we survive primarily by thinking. Achieving any
of our values, whether food, shelter, a career requires that
we think and plan first, and then act on our thinking.
Rationality guides against any form of irrationality, such as
evading factspretending that ones cash flow is sufficient
or technology is up-to-date when they are not, say, or
deciding on an emotion as opposed to a careful consider-
ation of facts. But how does one act rationally in daily life
and business? The rest of egoisms virtues elaborate on
that. They are all aspects of rationality, and will be dis-
cussed in turn: productiveness, honesty, justice, indepen-
dence, integrity and pride.
Productiveness is the virtue of creating material val-
ueswhich are necessary for human survival. We need a
range of values, not just to survive physically but to enjoy
life, from groceries and housing to pharmaceuticals and
hospital services to insurance policies to restaurant meals
and theatre performances. Creating such values is therefore
in ones self-interest, and also the central activity of busi-
ness. Producing material values is an aspect of rationality
in that it requires thinking, or the use of reason. There is no
material value that can be created without the process of
thought: no product or service has been ever produced
without designing it first, whether a nutritious meal or a
complex laptop computer.
Honesty is conventionally understood to mean truth-
telling, or not lying to others. Egoism has a broader view of
this virtue. It means rejecting the unreal and remaining
honest not just to others but to oneself. Honesty means not
faking reality in order to gain a value. Whereas rationality
is the virtue reminding us to adhere to reality (so that we
can achieve our values); honesty is its reverse side,
reminding us to reject that which is unreal (Peikoff 1991,
pp. 267268). Like all the egoist virtues, honesty is selfish.
It is in ones self-interest not to fake reality in any
A Model for Ethical Decision Making
mannerif one wants to achieve values. Pretending that
the cash flow is sufficient and technology up-to-date is not
going to make the business succeed. Deceiving a customer
about a products specifications is not an exercise in rep-
utation building. Creating values requires adhering to
realitynot faking it.
Justice is conventionally understood as giving people
their due, and it is considered altruistic. In egoism, justice
is a selfish virtue. It entails evaluating other people
objectively, and granting them what they deserve.
Assessing others and granting what they deserve is in ones
self-interest because achieving ones values often depends
on other people, especially in business. A person needs
others to get his work done and to trade with, and if these
people are not delivering what was promised, attainment of
values is jeopardized. Therefore, objective evaluation and
treatment of others is crucial to the achievement of ones
values (Smith 2006, pp. 135140). Justice in the egoist
sense involves trading a value for a value. If someone has
provided a value, they deserve to be rewardedby your
thanking them, recognizing them, patronizing their busi-
ness, recommending them to others, giving them a pro-
motion or a bonus, etc. If a person has failed to trade a
value for a value, or provided you with a disvalue, they
deserve to be punishedby being reprimanded or demo-
ted, providing a negative reference, avoiding their business,
etc. The principle is to reward a positive with a positive and
punish a negative with a negative.
Although not a conventional virtue, independence is
another aspect of rationality. It is the primary orientation to
reality, not to other people. It advises a person to do his
own thinking and not follow others blindly. Others can be
wrong; therefore understanding facts first hand is in ones
self-interest. For example, a manager may hire a consultant
to make recommendations for improving his companys
productivity but he still has to understand what the rec-
ommendations are based on and whether they are valid, in
order to implement them effectively. It is also much safer
to make a mistake on your own than to follow others
blindlysince mistakes made by yourself are much easier
to detect and correct. Like all the egoist virtues, indepen-
dence is not just about thinking. Independence in action
means supporting oneself by a first-handed approach in any
rational field. It means working for a living, and paying
ones own way (Peikoff 1991, pp. 251257).
Integrity is considered a virtue according to conventional
morality: it means adhering to ones principles, practicing
what one preaches. The egoist virtue of integrity is consistent
with the conventional view, with one important distinction.
Integrity in the egoist sense means loyalty not to just any
principles but to rational principleslike all the other egoist
virtues, integrity is an aspect of rationality (Smith 2006, p.
176). Any employer following the principle of racism by
317
refusing to hire those deemed to be of a wrong race is not
an example of virtue according to egoism. Integrity means
acting according to rational principles only.
Pride is conventionally considered one of the deadly sins,
and humility a virtue. But egoisms view of pride, like all of
its other virtues, is unconventional. Aristotle called it the
crowning virtue; Ayn Rand labeled it the sum of all vir-
tues. Some people equate pride with boastfulness or arro-
gance, but that is not the egoist view. Pride means moral
ambitiousness, striving to do ones best. As an egoist virtue,
pride does not refer to a feeling but to a policy of action for
doing ones best, in terms of acting morally (Smith 2006, pp.
221, 233). Practicing the virtue of pride means striving to be
rationalto adhere to facts; striving to be productiveto
produce material values; striving to be honestnot faking
reality; striving to be justgiving people what they deserve;
striving to be independentfocusing primarily on reality,
not on other people; and striving to have integrityacting
on rational principles. Table 1 presents a summary of the
main principles of egoism.
The Process of Ethical Decision Making: Spiraling
How the ethical decision making model works is presented
diagrammatically in Fig. 1. Central to it are the two levels of
processing and their interaction, as discussed in the section
Integration by essentials. The interaction is essentially a
process of spiraling between the conscious and the sub-
conscious levels. To illustrate the model, I will discuss a
decision to terminate an employee whose job has become
redundant due to outsourcing. At the conscious, rational
level of processing the decision maker (the manager) first
identifies a moral dilemma: a loyal employees job has
become redundant. What is an ethical course of action in this
situation? Many managers would tend to feel uncomfortable
in such a situation and to postpone the decision. The rational
decision making model would guide against procrastination
or acting on emotion and prescribe the following.
The first step at the rational processing level, after
identifying a moral dilemma, is the identification of
applicable moral principles. The two primary ones in this
case would be rationality and justice: the principle of
rationality would advise the manager to face the facts as
opposed to depending on emotions (such as wishing the
problem away), and the principle of justice would guide
him to assess others objectively and to give them what they
deserve, trading value for value.
At this point, the decision makers conscious mind
would send a command3 to the subconscious to search
for relevant information filed under rationality and
3
This happens automatically once a principle has been identified.
123
318 J. Woiceshyn

Table 1 The main principles and virtues of egoism

Principle/virtue Definition Example

Self-interest Each person should hold himself as the primary
value and be a beneficiary of his own actions
Man s life as standard The goodness of a choice or action should be
of value gauged by its impact on human survival
and flourishing
Rationality The recognition and acceptance of reason as
ones only source of knowledge, only judge
of values and only guide to action
Productiveness The process of creating material values by adjusting
nature to man
Honesty Not faking reality in the pursuit of values
Justice Assessing mens character and conduct objectively and
granting each person that which he deserves
Independence Primary orientation to reality, not to other men
Integrity Loyalty to rational principles
Pride The commitment to achieve ones own moral
perfection (doing ones best)
Source for definitions of the virtues: Peikoff (1991)
An oil industry entrepreneur who beats his competitors
to making a significant oil discovery and earns
superior profits as a consequence
A business person who engages in productive work and
voluntary trade with others (as opposed to defrauding
investors or customers)
An entrepreneur using reason to start a business:
observing facts and using logic to decide how to
finance it, who to hire, what to do when a new
competitor emerges
Employees of a company wanting to produce oil need to
think and act (map geological formations to identify
oil and gas reservoirs, model the reservoirs to select
well sites, drill well bores, lift the oil, produce it)
A building contractor who submits a bid based on actual
costs (facts) as opposed to wishful thinking or
deliberate evasion of the actual costs
A business owner assessing and choosing a potential
supplier based on factual evidence as opposed to
rumors, and then dealing with the supplier fairly
A businessman developing his own products based on
observation of potential demand and knowledge of
technology, as opposed to imitating competitors
An auditor who refuses to change his reports in the face
of bribes and threats from the client
Employees who do their work to the best of their ability
and use their minds to the fullest to find out ever better
ways of performing it

LEVEL OF STAGE IN THE DECISION MAKING PROCESS

PROCESSING

CONSCIOUS/ Recognition of Identification of Application of Resolution of

RATIONAL LEVEL a moral dilemma applicable moral principles: the dilemma
PROCESSING principles Thinking
Action

SUBCONSCIOUS/ Integration by Bringing Integration by

INTUITIVE LEVEL essentials: to bear essentials:
PROCESSING Search of relevant Storing the
subconscious information conclusion
memory files in the appropriate
file (under the
principle(s))

Fig. 1 An integrative model for ethical decision making

justice. If he has integrated his knowledge by essentials,
relevant information would come up. For example, if he
has formed the principle of rationality by integrating
adherence to facts with observation and logic, his sub-
conscious will bring to bear instructions such as no
evading the fact that the job has been outsourced as
opposed to whatever I wish to be true, is true or just
follow your feelings. Or, if the manager has formed the
principle of justice by integrating objective assessment and
granting what is deserved, his subconscious will provide
instructions such as no favoritism and recognize the
employees contributions and compensate accordingly. In
contrast, if the principle of justice was derived by inte-
grating fair treatment and always giving preferential
treatment to racial minorities, the subconscious instruction
would be to protect the persons job no matter what the
circumstances as long as the employee was a member of a
minority group.

123
A Model for Ethical Decision Making
If the subconscious processing provides relevant infor-
mation based on integration by essentials, the next step in
the rational decision making process would be to apply the
identified principles to the dilemma at hand, both in
thinking and in action. Let us use the principle of justice as
an example. Justice in thinking involves two specific steps:
(1) identifying the facts of a given case and (2) assessing
them by objective moral principles (Peikoff 1991, p. 279).
The decision to lay off an employee whose job has become
redundant involves the following facts: the competition has
intensified and made it necessary to reduce labor costs
through outsourcing; the company is fairly small and
therefore cannot just retrain and transfer employees to new
jobs elsewhere in the organization; the employee about to
be laid off has always performed his job conscientiously
and competently.
Several objective moral principles can be used to assess
these facts: self-interest, mans life as the standard of value,
productiveness, justice, honesty. The principle of rational
self-interest tells the manager that the company cannot
keep employees that do not contribute to value creation
anymore; in other words, the company cannot act altruis-
tically if it is to survive and succeed in the long run. The
owners must be beneficiaries of the companys actions. The
principle of mans life as the standard of value offers a
yardstick with which to evaluate the decision to terminate
an employee. It is proper for a rational human being to seek
his self-interest, such as a competitive, profitable busi-
nesswhich is good not only for the owners and remaining
employees of the business, but also for its customers,
suppliers and competitors, and even the employees who
lose their jobs due to outsourcing. (The more profitable
businesses are out there, the better their chances of finding
other employment.) The principle of productiveness tells
the manager that material values cannot be created without
making profitswhich requires eliminating redundant
jobs. The principle of honesty advises against faking: not
pretending that the company can continue to offer a job
that is more profitable to outsource. Finally, the principle of
justice guides the manager to trade value for value, in other
words, recognize the employees contributions to the
company and compensate accordingly.
Acting according to justice simply means granting what
a person deserves. If the person to be terminated has per-
formed his job well, that warrants compensation: a sever-
ance package when previously agreed (consistent with
what the company can afford), outplacement counseling if
feasible, recommendations to other employers, and good
references.
Applying the principle of justice resolves the moral
dilemma (how to handle firing of an employee ethically).
At the subconscious (intuitive level) this decision process
reinforces integration by essentials: information about
319
applying objective moral principles to the case of firing due
to job redundancy gets filed in the subconscious memory
filesready to be called up when a new, related dilemma is
encountered.
Discussion
Prompted by an empirical study of strategic decision
making that crossed over into ethics, I have proposed a
model of ethical decision making. It is consistent with the
dual processing model that now dominates the cognitive
science and general decision making literatures: both
conscious reasoning and subconscious, intuitive processes
operate when decisions are being made. The proposed
model is integrated in that it also sheds light on the rela-
tionship between conscious and subconscious processes. It
argues that the decision maker spirals back and forth
between the two levels of processing when identifying
moral dilemmas and applying moral principles and
accessing and using subconscious information about them.
The effectiveness of this spiraling interaction, and of
decision making overall, is based on a key process of
integration by essentials.
Besides a model of ethical decision making process,
the paper also proposes substantive content for the model.
Again based on the study of strategic decision making, I
argue that rational egoism is the moral code that CEOs
pursuing the long-term success of their companies arrive
at when integrating by essentials. Rational egoism is
briefly explained and used to illustrate how the interactive
spiraling model of ethical decision making works. By
incorporating both a process model and substantive con-
tent, the paper addresses the descriptive-normative gap in
ethical decision making literature. The descriptive
research typically reports how business people actually
make ethical decisions and is the basis of many of the
decision process models (OFallon and Butterfield 2005).
Many of these models do not have normative content that
tells people how they ought to act, or have it only
implicitly (Miner and Petocz 2003). However, while the
descriptive research helps us to understand ethical deci-
sions, practitioners turn to ethics for guidance in the face
of moral dilemmas, and therefore prescriptive ethical
decision models are also needed. The model I proposed in
this paper includes both description of how business
decision makers made ethical decisions and what sub-
stantive principles they usedthose of rational egoism
and then argues that those principles are consistent with
long-term success in business.
The primary argument for the consistency between long-
term success in business and rational egoism stems from
the primary virtue of that moral code: rationality. It has
123
320
been repeatedly observed that the primary requirement of
success in business is objectivity, or focus on facts (Locke
2000; Puris 1999). One cannot succeed in business, in the
long term, by pretending that ones products meets the
specifications, or proclaimed safety requirements, or by
misleading ones clients with fraudulent investment
schemes. Instead, one has to acknowledge facts, and base
all ones decisions on them. This is what the egoist virtue
of rationality and all its derivative virtues uphold.
The Limitations and Suggestions for Further Research
The proposed model has some obvious limitations. It is
based on study of strategic decision making, where the
participants were all CEOs. They were also named as
effective thinkers by their peers and industry experts.
Such a group likely does not represent an average busi-
ness decision maker, and therefore the process of inte-
grating by essentials may not be utilized, at least to the
same degree, by others. Also, the fact that the studys
participants had identified and applied moral principles
consistent with rational egoism does not suggest that other
business decision makers would do the same. In fact,
there is evidence that managers follow other moral codes,
such as pragmatism, utilitarianism, or altruistic deontol-
ogy (Singer 2010; Premeaux 2004; Frederiksen 2010).
But it is noteworthy that CEOs running successful com-
panies and known to be effective thinkers had induced
and applied rational egoist principles as critical for long-
term success in business.
To address the above shortcomings and to test the
proposed model, I make the following suggestions for
further research. First, studying ethical decision making
explicitly would be required. To tap into how business
people handle ethical dilemmas, scenario, journaling or
observation and interview methods could be used, either
on their own or in a combination. Scenario methods
suggest a focus on subjects in one industry at a time (so
that the same decision scenario can be used and com-
parisons across decision makers can be made). If the
participants are asked to reflect on their handling of eth-
ical dilemmas in a journal, industry contexts can vary
(although comparisons within an industry allow control-
ling for the industry-specific factors). The same is true of
observation and interview methods.
Second, participants for the above type of study should
be recruited from among those managers or executives
with a track record of long-term business success that are
recognized as principled or ethical decision makers, by
their peers or experts. Such a group could confirm the
prevalence of rational egoist principles or suggest alterna-
tive moral codes.
123
J. Woiceshyn
Implications for Ethical Decision Making Theory and
Practice
The identification of a critical process, integration by
essentials, as part of effective decision makers tool kit,
suggests it may play a role in ethical decision making in
business. If it is confirmed in future studies of effective
decision makers in successful businesses, integration by
essentials can help identify moral principles that provide
normative content to ethical decision models. Deriving
moral principles from the conduct of business decision
makers challenges the idea of the so-called naturalistic
fallacy (Moore 1903/1951, pp. 1014) which holds that
moral norms cannot be induced from requirements of
human life, since they are considered subjective.
The proposal that acting egoistically is moral contradicts
the view held by most ethicists today (e.g., Bowie 2009;
Hills 2010; Korsgaard 1996), although not all (e.g., Mait-
land 2002; Smith 2000, 2006). Nevertheless, if integration
by essentials is applied systematically to the question:
What moral principles are required for the long-term sur-
vival and flourishing of business firms?, it results in the
principles of egoism: rational self-interest, human life as
the objective standard of value, no initiation of physical
force or fraud, rationality, productiveness, honesty, justice,
independence, integrity, and pride. Despite of widespread
dismissal of egoism among ethicists, it appeals to business
decision makers who want to pursue their self-interest
without violating the rights of others. Egoism offers solu-
tions to moral dilemmas business executives face today.
For example, egoism helps prevent environmental degra-
dation by advocating protection of property rights. Egoism
also helps prevent and resolve conflicts among the so-
called stakeholders of a firm by advocating trade as the
means of interaction (i.e., all parties should be trading
value for value, based on mutual consent and mutual
benefit). Finally, egoism guards against the temptation to
pursue short-term gains through physical force or fraud.
For these reasons alone, egoism is a moral code worth
further exploration.
Appendix: A Summary of the Methodology
and Findings of the Strategic Decision Making
Study (Woiceshyn 2009)
To identify CEOs who were effective thinkers, I asked nine
oil industry experts (such as CEOs and investment bankers)
in Calgary, Canada to name chief executive officers of
successful oil companies whom they considered good
minds or effective thinkers. Calgary is the location of the
second-largest concentration of oil company headquarters
in the world. The oil patch there is a tightly connected
A Model for Ethical Decision Making 321

Table 2 The moral principles applied by the effective CEOs

Principle Self-interest Rationality Honesty Justice

Hold yourself as the primary
value and pursue values
with a long-term approach
Mid-range Do not sacrifice your interests
principles for others
Choose your work based on
what you love to do
Pursue profits
Adopt a long-term perspective
(not profit by any means)
Enjoy life (work and other
values)
Sample We want to win, fair and
quotations square
from the You want to make a bunch
effective of money through the
CEOs processbut more so, I love
the business, I love coming
to work every morning
I would refuse to jeopardize
the long-term viability of the
company to meet some
short-term expectations by
shareholders or analysts
You have to keep a long-
term perspective. Certainly
the financial part
[compensation] is there but
its also a personal desire to
grow and build something,
to be successful
Have a good work ethic but
dont go overboard. Travel
and see things. If you have
kids, spend time with them
Adhere to reality through
observation and logic
Decide based on facts vs.
emotions
Do analysis before deciding
Strive for objectivity:
Seek outside expert opinion
Use diverse teams
Embrace skeptics
Check quality of
information
Postpone decisions until the
relevant information is in
If you are not excited about
what you do and a little bit
emotional, its a tougher
business. But at the same
time you have to pull back
and say, What are the facts,
Jack?
Technically it is cheap to
look at data, so we should
look at everything before we
spend money
Bring in an independent
voice to provide strategic
advice, the cold hard light of
day approach
I would do all that
homework before I would
say yes. I would be
enthusiastic but very
thorough
I always ask what quality of
information is this based
on
Do not attempt to gain values
by faking reality
Do not cheat or pretend to try
to gain a value
Be honest toward yourself as
well as to others
Id rather just come clean [if I want to hire the best people
we are going to have] a
shortfall and say, we are
going to be short
You have to be honest in all
things, especially with
yourself. And you cant
tolerate any kind of
dishonesty, whether it is $5
on an expense account, or a
white lie, or a political
truth unplug him and you cant be
Everyone [shareholders,
analysts, staff] gets the same
story [from me]; they may
not like the story but they
get the same facts
Judge people objectively and
grant them what they
deserve
Hire best people and reward
them
Provide honest criticism
Terminate non-performers
The Golden Rule
Apply justice to yourself:
Be accountable for your
actions and take deserved
credit
I can attract. That has
always stood me well
If I give you criticism the
reason is that you have the
capacity to change
establish that kind of
honesty
He just didnt have the same
work ethic or enthusiasm as
everyone else. So we had to
afraid to do that I think it
is always best for
everybody
We treat everybody like we
would want to be treated
Some opportunities are
going to work out and some
wont I am accountable

community where most players either know each other
directly, or know of each other. I received 72 nominations,
32 of which had been suggested by two or more experts.
I asked the 32 to participate in a study of strategic decision
making. (The study also involved a comparison group of
not-so-effective thinkers. For more details, see Woiceshyn
(2009).) Sixteen of the effective CEOs agreed to partici-
pate. They either ran or had been recently running suc-
cessful oil firms, and had a median industry experience of
24 years.
At the beginning of the interview sessions, all the CEOs
were asked to read the same, realistic decision scenario
where a CEO was given three strategic alternatives (see
Woiceshyn 2009) and to think-out-loud how they would
deal with it, in order to elicit their thinking processes. The
interviews after the think-out-loud procedure included
questions beyond the scenario, about the CEOs motiva-
tion, decision principles, outside interests and backgrounds.
The sessions lasted for 90 min on average. Many were
followed by phone calls to clarify issues or to ask further
questions.
The interview transcripts were coded and then analyzed
in several rounds. I first grouped together the interviewees
comments by the question, then by the similarity of their
content. I also conducted a similar analysis of the decision
processes through which the CEOs handled the scenario.
Patterns of using reason and intuition emerged from these
categories of comments and analysis of processes, rein-
forced by each additional CEOs interview. For example, it
was directly observable from the interview transcripts that
the CEOs used various mid-range principles. I integrated
the mid-range principles into the general principles

123
322
discussed in the report, and then re-analyzed the transcripts
to validate the principles (e.g., by compiling quotations in
which the principles were manifested and also by being
alert to any evidence contradicting the principles). See
Table 2 for examples of the ethical principles used by the
CEOs. The notion of spiraling between the conscious and
subconscious processing was induced from the effective
CEOs iterative pattern of analyzing the decision alterna-
tives and applying principles.
The model of decision making by integration by
essentials and spiraling arose from the iterative contrasting
of the transcripts and the summary tables of the effective
CEOs with those of the not-so-effective CEOs. The most
striking difference between the two groups of CEOs was
the process labeled integration by essentials. In contrast
to the effective CEOs, the latter group did not demonstrate
integration: they did not identify many principles and made
very few connections between ideas. Although the not-
so-effective CEOs did some spiraling between the decision
alternatives, they did not do it very systematically, nor did
they apply principles to their decisions.
The study received a research ethics certification from
my universitys research ethics review board. All partici-
pants gave their informed consent to participate.
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