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Ethical decision-making: an integrative model for business practice
J.R.C. Pimentel
Department of Psychology, University of Canterbury, Christchurch, New Zealand

Ethical decision-making

359
Received April 2008 Revised August 2008 Accepted October 2008

J.R. Kuntz
Department of Philosophy, The University of Edinburgh, Edinburgh, UK, and

Detelin S. Elenkov
Department of Management and Marketing, Angelo State University, San Angelo, Texas, USA
Abstract
Purpose – The purpose of this paper is to offer an interdisciplinary review of the existing research on ethical behavior – informed by philosophical theories, social sciences, and applied business research – and identifies the merits and limitations of the extant theories, including the applicability of prescriptive frameworks and models to business practice. Design/methodology/approach – Following the review, the paper advances a descriptive model of ethical decision-making criteria that elucidates how individual, organizational, and environmental variables interact to influence attitude formation across critical components of an ethical issue. Findings – The model advanced expands upon other existing frameworks and provides a comprehensive and simultaneous assessment of the interplay between individual-level variables (e.g. demographic variables, position in the organisation), the structure and climate of the organisation in which the decisions are made, and the social and political features of the business environment. Practical implications – The proposed model can be used as a training tool and it holds several advantages over the extant alternatives, namely versatility (it is adaptable to the specific organizational context in which respondents are required to conceptualize the dilemma and generate courses of action), and scope (the model allows for the simultaneous assessment of a myriad of cross-level variables). Originality/value – The paper offers a comprehensive decision-making model that can be used to examine ethical decisions in business settings, to investigate potential differences in decision-making accuracy and ethical reasoning between groups and individuals, and to examine the impact of changing ethical climates in organizational strategy. Keywords Decision-making, Business ethics, Business environment Paper type Conceptual paper

Introduction The examination of ethical behavior in organizational contexts has merited considerable interest in the past two decades from researchers and practitioners alike. However, the theories and frameworks proposed have failed to clearly integrate decision-making components and intervenients across levels of analysis, and to provide a consistently employable definition of what constitutes ethical behavior in business practice. The inconsistency across theoretical models and subsequent empirical findings is largely

European Business Review Vol. 22 No. 4, 2010 pp. 359-376 q Emerald Group Publishing Limited 0955-534X DOI 10.1108/09555341011056159

namely those that are teleological and deontological. Rationale for ethical behavior and decision-making processes has been offered mainly from the perspective of classical moral theories borrowed from the discipline of philosophy. even if theoretically sound and open to empirical cross-sectional testing. 1999). utilizing methods that range from anecdotal evidence to the examination of relationships among decision-makers and organizational variables. but these systems are quintessentially tied to certain ethical theories. at best. ethical behavior research has provided integrated frameworks that. the present paper can only gesture at the limits of deontological and teleological ethical theories and propose that future models for ethical decision making in business include these other important and legitimate ethical perspectives. and applicability of prescriptive frameworks and models to business practice. to offer a review of the existing research on ethical behavior informed by philosophical theories. the applied business perspective provides a broad array of descriptive and prescriptive frameworks. to propose a descriptive framework of ethical decision-making criteria that integrates the extant approaches at different levels of analysis.EBR 22. and (2) they limit themselves to ethical evaluations that fall within the boundaries of teleological and deontological normative theory.” “relationships. This approach incorporates a number of factors that account for variation in the analysis and interpretation of components of an ethical dilemma. however. not only are decision-making systems intricate and typically bring forth secondary outcomes that were unforeseen. The latter limitation leaves out normative evaluations that reflect ethical characteristics such as “closeness. The presently available models are insufficient for either of two reasons: (1) they fail to find that individuals’ characteristics are integral to the identification of ethical dilemmas. to identify potential and limitations of the extant theories of ethical behavior with respect to criteria selected. and from applied business theories founded on economical and sociological principles. The individual as a moral agent Classical moral theories Organizational decisions are formulated under the assumption that they will generate particular outcomes. incomplete. levels of analysis. Note.4 360 attributed to the fact that business ethics has been investigated under the lens of several disciplines with different foci and methodological orientations. and social and legal environment. from the organizational and business perspective. The present paper has three main purposes. orchestrated to generate ethical actions on the part of the organization. including individual differences. However. and few attempts at offering an interdisciplinary approach can be encountered. knowledge of organizational norms. While the philosophical approach examines ethical behaviors using classical normative theories to explain ethical choices. 2001. integration between constructs of interest. These have easily identifiable actions . As a result. Hursthouse. First. namely those that fall within the teleological and deontological frameworks. They are.” and “moral virtue” (Slote. Failure to integrate these essential properties of moral decision making and other aspects of a broader array of ethical theories has led to the construction of models that are. social sciences. Swanton. Second. Third. and applied business research. largely miss the scope of ethical decision making in business settings. 2003.

which becomes problematic for some of these approaches (Shultz and Brender-Ilan. Demographic variables Moral agency. Despite the growing evidence suggesting Ethical decision-making 361 . 1999. Shultz and Brender-Ilan. 2005. Thus. the deontological approach fails to provide a clear definition of what should be considered “right” or “wrong” and it is polarized with respect to the criteria considered in determining the rightness of an act. will differentially influence the degree to which decision-makers take into consideration the impact of decision outcomes on all parties involved. age. Roth. classical moral theories describe patterns of decision-making rationale without addressing the nature of individual-level factors that account for dissimilar moral positions across individuals. 2007). First. Jones et al. and work experience are amidst the most frequently examined variables (Forte. Second. has been presented in the extant literature as an individual-level phenomenon. empirical findings suggesting that decisions aimed at promoting long-term benefits for the decision-maker are legitimated neither by most managers in their business practice. the adoption of deontological or relativist approaches to the resolution of ethical dilemmas will also depend upon the interaction of individual characteristics with organizational codes of conduct. adopting a utilitarian perspective to ethical decision making in organizations limits the quality of the decisions by failing to serve the interests of all parties involved. or a relativist perspective. Overall. 2007). deontological theories hold that principle and duty should guide individual action. This is important in practice and to the model proposed here since decision-makers will acknowledge that a business issue constitutes an ethical dilemma to the extent that they are capable of conceptualizing managerial actions. In essence.. nor by the organizations’ codes of conduct. The following sections will elaborate on individual-based approaches to moral decision-making. or the choice to engage in a particular course of action given an ethical dilemma. 2007. Non-consequentialist theories provide an alternative that emphasizes the nature of the act rather than its outcomes (Bartlett. More contemporary approaches in corporate virtue theoretical perspectives. Valentine and Rittenburg.. 2003. the normative nature of deontological normative evaluations is left to relativistic perspectives of the good.that can be assessed as right/wrong or moral/immoral. holding that conditioning oneself to act morally is a matter of habit and it should be developed (Hinman. 2004). In practice. classical moral theories inform the ethical decision-making process in the business context from two main perspectives. Taking utilitarianism for an example. Ethical decision making explained in the light of classical moral theories provides a reasonable attempt at connecting individual behavior with organizational normative approaches. or – even less attractive – to decision-maker’s own unabated biases. 2004. they emphasize the intersection between individuals and the business environment by equating the decision-maker’s orientation toward outcomes (i.e. This assumption led a number of researchers to investigate the antecedents of ethical decision making from the standpoint of individual differences. 2004). deontology proposes a rights-based code of conduct for individual action (Rachels and Rachels. For example. and by conflicting with regulations that guide organizational functioning in a business environment. The emphasis on a deontological. McDevitt et al. However. Gender. However. 2007). self-interest vs maximization of positive outcomes for all) with organizational and legal boundaries that guide or constrain this orientation.

the research findings are often conflicting..EBR 22. It is plausible that the inconsistent findings stem from the employment of differing frameworks and models in the investigation of individual differences and decision making.. and broader wealth of knowledge allowing a more thorough situational analysis with better understanding of the decision’s impact on relevant stakeholders and organizational processes.. 2001. 1993. others contend that age is directly associated with preference for the deontological approach in detriment of a relativist approach (Shultz and Brender-Ilan. Findings are unanimous with regard to the impact of gender differences in ethical intent: women report lower intention to behave unethically than men. the empirical findings are consistent across non-professional samples (McDaniel et al. and managerial groups. 2007). While competing theories defend that organizational and societal characteristics (e. age and work experience will be highly correlated and confound empirical results. Terpstra et al. 2004.4 362 a relationship between demographic variables and ethical stance. From a practical standpoint. and position in the organization (Gowthorpe et al. 2004). (2) the examination of the interaction between moral reasoning and demographic variables in determining ethical behavior. Valentine and Rittenburg. In practice. 2007). Researchers also appear to disagree with respect to the propensity for a particular approach to moral reasoning according to gender. While some researchers argue that organizational members do not differ in their moral approaches to decision making based on age. Research findings also suggest that older workers display greater intention to act ethically than younger subjects when presented with a hypothetical dilemma (Terpstra et al. and (3) a dilemma-based approach that considers the interaction between the content of the ethical dilemma and the decision-maker’s characteristics. 2007)... and no consensus is found regarding women’s preference for the deontological approach . glass ceiling effect) mediate this relationship.g. greater likelihood of acknowledging ethical dilemmas and to provide more appropriate solutions based on previous experience with similar situations. The second approach presented entails the investigation of the degree to which the interaction of moral reasoning with demographic characteristics explains interpersonal differences in ethical behavior (Gowthorpe et al. McDevitt et al. 2002).. Terpstra et al. From a lifecycle standpoint. 1993. Shultz and Brender-Ilan.. Valentine and Rittenburg. it is possible that women are more likely to recognize ethical dilemmas and to adopt a more conservative moral stance to decision making when a dilemma is presented. 2007). as do individuals with more work experience. gender. age and experience level will be associated with greater exposure to and internalization of organizational norms with regard to the resolution of dilemmas. Contrary to the empirical findings from scenario-based studies. Despite the criticism regarding their limited applicability to organizational settings. gender. The scenario-based approach involves tests of individual differences based on rating scales that provide information on the degree to which decision-makers intend to act ethically (McDaniel et al. 2002. 2001. 1993) and professional samples (Valentine and Rittenburg.. In practice. research has devoted considerable attention to the predominance of particular moral approaches to decision making among individuals of specific age. Stedham et al. research on the impact of personal moral philosophies on ethical decision making tends to elicit conflicting results. ethical intent and ethical behavior have been examined based on three perspectives: (1) a scenario-based approach that assesses intent to act in an ethical manner. 2007..

This proposition further suggests that the examination of ethical behavior requires a dynamic and integrative framework. whereas older individuals consider perceived seriousness as a critical criterion for ethical decisions (Barnett. the existing differences bring forth different conclusions. The fluid nature of individuals’ perspectives on values and behaviors as the socialization process in organizations occurs may explain some of the conflicting findings presented in this section and potentially preclude the use of stable frameworks (e.. 2007). and appearance-referential moral theory dimensions. Dilemma-based research explores the role of individual differences in determining which criteria are considered in ethical decisions.g. 2001). Regardless of the methodology adopted. empirical findings suggest that younger individuals are susceptible to their peers’ input when faced with an ethical dilemma.. The implications of this meta-analytical study are twofold. Regarding the latter. Gowthorpe et al. namely their role as moderators. Future research would benefit from further exploration of ethical dilemmas’ characteristics that influence ethical judgments and behavioral intent. consequentialist.or a relativist approach to decision making (Shultz and Brender-Ilan. While there is considerable overlap between the proposed dimensions. 1997). there has been considerable debate on the differences between men and women regarding their ethical stance and behaviors. personal moral philosophy approaches) to explain ethical decision-making patterns across individuals. the findings challenge the assumption that men and women bring unchangeable values into the work context. deontological. and justice perspectives in the examination of the influence of interpersonal differences on ethical behavior. relativism. Stedham et al. deontology. 2004. These research findings propose that the nature and characteristics of an ethical dilemma will be perceived differently and elicit different courses of action depending on the characteristics of the decision-maker. there has been recent debate on the possibility that decision makers may consider different moral positions simultaneously when faced with a dilemma (Stedham et al. whereas Shultz and Brender-Ilan (2004) incorporated egoism. Results from a meta-analytical study examining gender differences in ethical perceptions in a business context suggest that these differences are moderated by the nature of the dilemma and by work experience (Franke et al. With regard to gender. utilitarianism. gender. First. and calls for the deconstruction of moral reasoning dichotomies to explain decision-making processes. expectations. Moreover. For instance. and less influenced by social roles stemming from societal norms. One of the most widely accepted explanations for gender differences in ethical decision making involves the role of socialization in generating interests. and values that are unique to men or to women. and level of experience have represented the primary individual-level variables of interest in ethical decision-making research. In practice.’s (2002) comprehensive framework includes self-referential. A possible explanation for the discrepancies between the scenario-based and the moral reasoning approaches concerns the differing models from which research questions are generated. and the moderating role of individual-level variables. 2007). Finally. the dilemma-based approach highlights dilemma characteristics and their moral intensity as determinants of ethical behavior. age.. This constitutes a promising shift from a perspective of ethical decision-making rooted on personal moral theories and moral development to a contingency perspective that comprises both the decision-maker’s characteristics and the nature of the dilemma presented. it is plausible that as men and women are socialized into the work environment their ethical perceptions become more associated with business-related factors and structural constraints. Ethical decision-making 363 .

this research underscores the importance of integrating leadership behaviors with organizational values and vision in order to create a consistent. 2007). positive perceptions of leaders’ ethical conduct are pivotal to the creation of an ethical climate that represents the organization’s mission and values (Brown. 2006). 2007).e. The first paradigm highlights the instrumentalization of ethics as a method of ensuring conformity to endorsed practices and standards (Graaf. In this sense.g. Moreover. and effective ethical climate. Ethical leadership can be defined as the “demonstration of normatively appropriate conduct through personal actions and . Ethical dilemmas and proposed solutions need to be examined as context-dependent phenomena. This concern with an ethical leadership that promotes value alignment between the organization and its constituents is reflected on a third ethics management paradigm: value-based ethics. the moderating role of socialization and organizational variables on ethical values highlights the importance of examining interactions between individual differences (e. and the second position presupposes that individuals are capable of making autonomous and rational ethical decisions when provided with an adequate array of options and information (Freeman and Francis. ethical leadership programs. conveying an accurate shared perception of the manner in which ethical issues are expected to be handled in the organization (Dickson et al. The promise of ethical leadership Reports of unethical behavior and of exemplary leadership in organizations have engaged considerable interest in employee accountability with respect to managerial decisions. gender and work experience) and of further investigating the relationship between organizational characteristics (i.. coherent.. 2001). Recent research has focused on the topic of ethical leadership and the categorization of ethical leadership behaviors in (Brown. 2007).. 2007).EBR 22. 2005). The organization as an ethical compass Organizational ethics: institutional. individual-based. and society. and rely on the integration of organizational systems (e. Brown et al. recent research suggests that managerial responses to ethical decisions are influenced by the ethical stance of the organization (Jones et al. Value-based ethical programs ensure that multiple organizational members have responsibility for making ethical decisions based on knowledge and internalization of values (Collier and Esteban. and value-based approaches Compliance to existing codes of conduct and emphasis on individual capacity for adequate moral agency constitute the two prevailing paradigms of ethics management in organizations (Maclagan. namely the role of leaders in fostering an ethical culture. strategic goals) and ethical decisions. Leaders have a critical role in ensuring participation in decision making and value-structuring while furthering norms that support corporate ethics. These programs place emphasis on the positive outcomes of ethical decisions for individuals. organization. the investigation of leaders’ characteristics and behaviors in relation to organizational values and practices becomes essential to a better understanding of the emergence and maintenance of an ethical climate. 2007. In particular.g. Furthermore.4 364 Second. formal codes of ethical conduct. The following section will describe ethical behaviors and decision making in the context of some of the predominant organization-level perspectives and frameworks. 2006). training and performance appraisal) with strong ethical leadership to promote the internalization of ethical values and enactment of desired ethical behaviors.

the extent to which leadership behaviors are “normatively appropriate” will depend upon the organization’s culture. this relationship was not supported (Turner et al. namely the existence of structures that facilitate frequent interactions with organizational members. Second. Empirical findings based on unit-level examinations reveal that leaders perceived as transformational tend to exhibit post-conventional or more advanced stages of moral reasoning. Similar to the conclusions drawn regarding demographic variables. Furthermore.. holding oneself accountable for outcomes and decisions. and the formal assignment of ethical responsibility to individuals and groups based on established codes of conduct to enable corrective action or reward from the leader when pertinent (Fuqua and Newman. and the promotion of such conduct to followers through two-way communication. 2007). In view of these findings. the business industry. 2005).. reinforcement.’s (2005) qualitative research findings on the leadership characteristics relevant to ethical role modeling identified a set of behaviors typically enacted by ethical role models. 2002). First. Two explanations are advanced. For instance. 2002). leaders perceived as transactional may be conditioned by organizational norms and structure to enact transactional behaviors while reporting high level of moral reasoning. However. most areas of ethical leadership intervention require that specific structural and functional arrangements are in place in order to ensure their effectiveness. Weaver et al. and decision making” (Brown et al. These behaviors include support for others. Weaver et al. moral development theory offers limited account for differences in leadership behaviors. Examples include the systemic implementation of ethics codes to facilitate leaders’ integration of strategic plans with organizational principles. For instance. suggest that the extent to which leaders display these behaviors is highly dependent upon organizational characteristics. Fuqua and Newman. nature of the dilemma) on the approach to an ethical situation.interpersonal relationships. values and work experience. 2002.. 2007. organizational. This definition brings forth complex empirical questions concerning the role of individual. particularly with respect to the transactional style.. The examination of moral theories and of moral development constitutes a common approach to leaders’ decision making at the individual and group levels of analysis (McDevitt et al. results of empirical studies relating leadership behavior with moral development are conflicting (Turner et al. and ability to articulate personal and organizational ethical standards. Weaver et al. the characteristics of the organization also play a significant role in practices espoused by ethical leaders and their effectiveness. 2005) and espoused practices (Brown. With the exception of role modeling. legal considerations.. it is expected that individual characteristics such as personality. 2006).. Burke.g. 2006) that facilitate the institution of a desirable ethical climate. While it would be expected for perceived transactional leadership to be related to pre-conventional stages of moral development. and the socio-cultural setting in which the business operates. 1999. honesty. Research has credited considerable attention to the investigation of leaders’ characteristics (Turner et al. the examination of moral development stages as a continuum fails to accurately reflect the influence of external factors (e. and contextual variables in ethical decision making and decision outcomes. and organizational characteristics such as communication systems and formal ethics code will influence the manner in which managers make ethical decisions. a careful integration of individual characteristics with the ethical climate of the organization will likely provide sound basis for the examination Ethical decision-making 365 . Consequently. and the elements deemed relevant to a particular decision. fairness to others.

e.EBR 22. From this standpoint. organizational accountability for business decisions is ensured internally through the implementation of knowledge structures and administrative systems that reinforce ethical behavior. factors that promote a shared perception of behaviors and courses of action that care endorsed by the organization) offers a promising avenue for researchers and practitioners. the identification of variables that foster strong ethical climates (i. reputational capital for organizations. and subsequent achievement of organizational goals. and whether organizational members have a positive perception of their leaders’ ethical conduct. training and development. and an integrated human resources system (i. it is impossible to obtain a snapshot of the factors that account for ethical decisions in business environments. building ethical values into the workforce through training and open communication. namely codes and standards formulated by local and international associations that ensure uniform procedures in a global business environment. Although this approach to ethical management is mainly focused on leadership behaviors elicited by organizational systems. ensuring the attraction and retention of a valuable workforce.. 2006) and discourse analysis (Graaf. compensation.e. the endorsed criteria and path for decision making. Moreover. 2006) represent two viable methods for examining the extent to which individuals share perceptions of the ethical standards upheld by the organization. 2001). the context-dependent nature of ethical dilemmas requires an approach that considers the interface between individual characteristics and formal organizational systems that guide and reinforce its members’ behaviors.4 of ethical behaviors and decisions among leaders. Assessing ethical climate. A systems perspective of ethical decision making Considering the intricate and dynamic nature of the ethical decision-making phenomenon. a formal ethics code that provides behavioral guidelines for ethical decisions. and responsible leadership that ensures clear communication regarding ethical standards and fair workplace practices. and performance appraisal system) that helps sustain and develop ethical capability. The extant literature proposes the integration of leadership behaviors and organizational practices in promoting strong ethical climates. 2007. This organizational competency entails a solid wealth of knowledge regarding business ethics issues in a global environment. Yet. whether organizational and individual values are aligned. it proposes the inclusion of extra-organizational components. corporate ethics has been emphasized as a source of competitive advantage. 366 . creating competitive advantage. Ethical capability incorporates the leadership characteristics and organizational systems that enhance business practices and outcomes through ethical behavior. Aggregate climate measures (Fuqua and Newman. Hence. Dickson et al. In the last decade. an organizational structure and culture that foster cross-level communication. selection system. The term “ethical capability” was advanced by Buller and McEvoy (1999) and describes the organization’s ability to identify and to provide adequate responses to ethical issues in the global business environment. shifting the focus of ethical decision making from individual contributors to the organizational system. This emphasis has led to the acknowledgement of an organization’s ethical capability. and using the reward and performance appraisal systems to recompense and reinforce ethical behavior constitute some of the most effective methods for building and maintaining strong ethical climates (Collier and Esteban.

whereas Japanese firms stress the importance of corporate social responsibility. 1994). Hypernorms represent the set of principles that limit the realm within which microsocial norms can be generated (i. and point to several limitations of ISCT. presents an attempt to explain decision making in organizations in reference to normative contracts among organizational constituents and to the boundary conditions determined by the external environment (Donaldson and Dunfee. ISCT does not address non-active third parties that may be affected by contractual outcomes (e. Although ISCT was presented as a normative theory. revealing less sensitivity to microsocial contracts. The business environment – an external boundary perspective The integrative social contracts theory (ISCT). However. In general. right to exit the community. managers with international business experience (i. moral free space). These findings highlight the importance of cross-cultural considerations in the definition of micro.and macro-norms that guide ethical decisions.. individual characteristics determine the extent to which decisions are more heavily informed by organizational norms or by moral and environmental guidelines. However. Ethical decision-making 367 . Cross-cultural research will expectedly clarify the domain of macro-norms as global businesses become prevalent and narrow or transform the array of industry-based norms.e.. proponents of the ISCT maintain that decision making in business communities are bounded by ethical norms developed by its members – microsocial contracts – that require informed consent. environment and social communities). and of environmental standards. From an organizational standpoint. Contrary to most theories derived from the moral philosophy literature. The applicability of ISCT to business practice is rooted on the notion that individuals vary in the emphasis attributed to specific norms when making decisions. that is. 1994). Overall. 2004). First. Second. the organizational system and constituents. 2004). individuals tend to adopt a relativist or contractarian approach to their decisions (Spicer et al. US organizations place greater emphasis on eliminating corruption and complying with domestic laws.g. involving values fundamental to individual existence that provide guidelines for the evaluation of moral norms generated by the business community (Donaldson and Dunfee. expatriates) are more likely to consider microsocial norms when these are not conflicting with hypernorms. the ISCT suggested a contextual framework to describe ethical decision making that is specific to business environments. 2005). and consistency with hypernorms. the realm of hypernorms will likely remain undefined. and individuals without exposure to international business settings are more likely to base their decisions on hypernorms. particularly environmental stewardship (Reich. the definition of what set of universal rules constitute hypernorms is unclear. 2007).individual decisions are a product of the interface between personal dispositions. For instance. resent research has employed this theory to prescriptive ethical decision making. The social contract model operates at two levels: the microsocial contracts level that comprises the set of moral norms emerging from consensus among individuals belonging to a particular business community. and the macrosocial contracts level that includes norms established by the business community with reference to hypernorms (Wempe.e. Failure to address environmental concerns and the interests of the social community in which the business is established may result in the violation of fundamental principles of corporate social responsibility. the national culture influences the adoption and preference for specific dimensions of corporate codes of conduct (Hill et al.

This theory comprises the integration of variables at different levels of analysis. While it would be intuitive to assume that a clear legal mandate would more effectively address the need to establish uniform guidelines for conducting global business. the vague common law mandate is predominant in our business culture. the role of organizations and leaders in determining ethical climates. where a contingency perspective is more adequate. research findings reveal that the vague common law mandate is less effective in inducing commitment to legal compliance than the clear legal mandate. where standards are clearly established. and cultures. In particular. In practice. However.4 368 With this matter in mind. each of the theories described reveal a number of limitations for ethical decision making.EBR 22. situations. the limitation of classical moral theories in explaining ethical behavior concerns the reliance on universal normative values in predicting and proposing ethical decision-making guidelines in a business context. it proposes sequential stages of moral development as antecedents of moral agency but it disregards how contextual factors that interact with individual dispositions and characteristics impact the choice of a course of action. Moral development theory offers a conceptually and methodologically unsound approach to explain individual differences in ethical attitudes and behavior. Research based on this universalist perspective of ethical value resulted in conflicting findings with regard to the examination of the influence of demographic and dispositional variables on ethical intent and behavior. 2007).and macro-social contracts by reducing the moral free space. Limitations to current approaches Individual-based theories The examination of external boundaries to corporate ethics reveals that the nature and subsequent impact of ethical decisions differs across cultural and business populations as a result of their disparate normative values and boundary conditions. and the impact of cultural settings and legal contexts in determining the ethical stance of organizations. It acknowledges the relationship between leadership . While providing valuable input to inform business decisions. One reason presented for the preference for a vague common law regards the fact that the clear legal mandate does not adequately attend to nuances inherent in particular industries. these attempts at uniformization are not without criticism. a number of international organizations have attempted to establish standards of corporate conduct that protect the interests of third parties not represented in business decisions but indirectly affected by them. and there is a direct relationship between standards and objective situations (Di Lorenzo. Enforcement of global business legislation constitutes an artificial boundary to decision-makers that facilitates the evaluation of compatibility between micro. Hence. Organization-based theories Ethical capability represents the most promising theory within organization-based research in ethical behavior. The present paper has provided a review of the literatures incorporated into the three business ethics paradigms: the individual as a moral agent. This legal boundary issue accentuates the responsibility of individual decision-makers and of organizations in particular for implementing systems that effectively integrate knowledge of corporate strategy and values with global business standards.

and cultural environments. and the actual consequences of this behavior have a posterior impact on the individual’s belief system. the ISCT makes no claims with regard to variations of hypernorms across business and cultural populations.and extra-organizational norms. the existing literature has failed to present empirical testing of the proposed theory in relation to the quality of ethical decisions. influence the perception of ethical dilemmas.g. these authors have narrowed their selection to four seminal models that offer comprehensive perspectives of ethical decision making in business practice. Moreover. Environment-based theories The ISCT proposes a normative framework that describes the relationship between organizational norms and procedures and the boundary conditions imposed by the business environment. Ethical decision-making 369 . ranging from agent-centered to environment-based conceptualizations of ethical decision making. These perceived factors will in turn determine an evaluative process that culminates with ethical behavior.e. affecting future deliberations.characteristics. presupposing that the decision-maker reaches a “right” or a “wrong” decision that informs subsequent ethical decision making. ethical evaluations of behavior are limited to the confines of teleological or deontological ethical theories. Ferrell and Gresham (1985) and Hunt and Vitel (1986) have proposed two distinct contingency frameworks for the examination of ethical decision-making rooted on marketing ethics. The second framework. behaviors. The first framework advances that ethical dilemmas are brought forth by the social and cultural environment in which decision-makers are embedded. and organizational effectiveness. potential alternatives. and anticipated consequences. business. Despite its undeniable contribution to the business ethics literature. the existence of well-established codes of conduct and of role modeling effects of which leadership constitutes an example) will have an impact on individual decision making. attitudes and knowledge) with organizational factors (i. Hunt and Vitel’s framework suggests that a first step of dilemma recognition is contingent upon these individual and environmental factors. and provides no direction for the integration of social communities and other environmental units into the decision-making model. the ISCT has limited applicability to practice. Contrary to Ferrell and Gresham’s theory assuming the impact of individual and environmental factors at the decision and behavioral action stage of the model. the Hunt and Vitel model has it that behavioral consequences impact future deliberations regarding ethical issues. Although multiple examples could be presented in the present review. To date. the extant literature also introduces several integrative models that attempt to describe the ethical behavior components and functional dynamics. proposed by Hunt and Vitel (1986) offers an intricate model wherein the organizational. along with personal characteristics. which subsequently affects the ethical behaviors enacted (Ferrell and Gresham. 1985). Designed as a normative theory underscoring the importance of alignment between intra. However. Review of integrative models of ethical decision making Aside from theories grounded on specific paradigms. and that the interplay of personal characteristics (e. it advocates organizational systems and administrative practices that create and sustain strong ethical climates. Moreover. as well as consistency between organizational practices and legal guidelines.

organizational status. In addition to a shifting focus from individual and environmental factors to the nature of the dilemma itself. it fails to specify the nature of these variable interactions. In Jones’ (1991) framework. and environmental factors that impact the evaluation and resolution of ethical issues. and issue-specific criteria. where each step from issue recognition to behavioral action is affected by individual. the characteristics of a particular moral issue will permeate all stages of decision making. and previous experience with the ethical dilemma presented) with socio-cultural factors beyond the organization. to differing extents and foci. and with regard to ethical decision making this model allows for the magnitude of the effect of individual and situational factors to vary across issues. interact with individual. rendering the transition between stages contingent upon particular characteristics inherent in the moral issue.. Trevino’s (1986) model fails to include the critical interplay of demographic variables that affect dilemma recognition (e. one of the most compelling aspects of this framework concerns its stepwise approach to decision making. and resolved in the same manner will produce the same satisfactory outcome. but suggest that further integration of individual and environmental factors is necessary to increase their functionality and overall applicability to the business context. The model presented here attempts to buttress Jones’ suggestion in these regards. even if the culture of the organization is markedly egalitarian. environmental. a later review of existing frameworks for ethical decision-making highlighted that none of the existing models considered the characteristics of the dilemma itself as determining factors for its recognition and evaluation ( Jones. For instance. However. age. The three models described above offer comprehensive approaches to ethical decision making in organizational settings that consider.EBR 22.g. 1991). A framework of ethical behavior in business practice The review of the existing literature on ethical behavior and decision-making exposes a clear divide between researchers and practitioners with regard to the . gender will likely have a more substantial impact on ethical decision making in social cultures marked by greater gender inequality (Franke et al.4 370 A third model offered by Trevino (1986) introduces an interactionist perspective of ethical decision making in which stages of cognitive moral development. Interactionist models typically constitute sound approaches to the examination of organizational behaviors in general. Jones’ framework is similar to the model suggested here in this regard. The introduction of this notion is of particular interest considering one of the main limitations of Hunt and Vitel’s (1986) model: its reliance on the observed consequences of decisions that confer the decision-maker with the necessary information to improve upon future decisions regarding ethical dilemmas.and situational-level moderators to influence ethical behaviors. organizational. individual. However. then similar dilemmas identified. Note that the authors find these models to be adequate as a systematic attempt to describe ethical decision making in business environments. 1997). However. if the agent reaches a decision with satisfactory consequences. gender. Jones’ issue-contingent model of ethical decision-making introduces the notion of moral intensity of the moral issue to describe a set of measurable characteristics that influence different steps of ethical decision making. while the integration of what Jones terms “moral intensity” with the various components of the decision procedure is ubiquitous. organizational. This feedback loop implies that. analyzed. as described by Kohlberg.

The framework proposed in this paper (Figure I) attempts to overcome some of the limitations identified in research and applied fields by offering testable links between constructs of interest established in the extant literature and a four-step decision-making path. cultural background) Ethical capability Environmental characteristics (uncertainty. by proposing cross-level relationships between the constructs of interest. However. researchers provide descriptive frameworks to explain ethical behavior and test the relationship between individual-level variables in reference to theoretical models that can hardly be extrapolated to applied business settings. managerial level. strategy. managerial level. Models derived from business practice typically present a series of steps to guide ethical decision making. experience.conceptualization of the ethical decision-making phenomenon. While practitioners rely on prescriptive guidelines to decision making that disregard individual biases and external constraints. research frameworks are used to test relationships between individual characteristics and business decisions. be applicable to different levels of the organization. Although there is some variation across the proposed guidelines. managerial level. the frameworks extrapolated from the empirical findings are often descriptive in nature and fail to offer testable propositions. Recognize and define ethical dilemma (characteristics) Identify impact of dilemma and decision outcomes on stakeholders Identify relevant organizational values/norms (internal boundaries) Identify relevant legal regulations and environmental characteristics (external boundaries) Ethical decision-making 371 Ethical decision-making path Empirically discerned Variables of interest Individual differences (experience. business regulations) that influence the decision process and possible outcomes. organizational norms and environmental regulations). regulations) Figure 1. Framework for ethical behavior in applied business . Second. As suggested by Gatewood and Carroll (1991). the proposed framework will address the culture. be related to both behaviors and outcomes. address shortand long-term aspects of performance. Alternatively. four ethical decision-making steps are consistently suggested: identification of issue as an ethical dilemma. these guidelines have limited utility in organizations when individual and organizational factors that constrain the decision-making process are not accounted for and adequately managed. First. cultural background) Nature of the dilemma Ethical capability Individual differences (gender. and identification of environmental factors (e. and goals of the organization. Hence. Most of the extant research is limited for two main reasons. identification of parties/constituents affected by the outcome of the decision.g. and address characteristics that are under the decision-makers’ control or knowledge (e.g. cultural background) Ethical capability Individual differences (experience and managerial level) Ethical capability Individual differences (experience. a framework of ethical decision making should abide by a number of measurement criteria. and by offering a model that can be tested to clarify the determinants of ethical decision making and to enhance the quality of decisions in business practice. gender. be applicable within and across jobs. the investigation of ethical behavior determinants is restricted to the individual level of analysis. identification of organizational norms.

For instance. it is expected that the higher the managerial position occupied by the decision-maker and the greater the level of experience. with each stage of a commonly used decision-making path. The decision-making path consists of four stages: (1) recognizing and defining the ethical dilemma. Identify relevant stakeholders and the impact of decisions on these stakeholders. and other extra-organizational factors (i. These decisions are informed by guidelines and norms particular to the organization or the business industry. organizational culture. . Recognizing and defining the ethical dilemma.4 372 Model specification The following model proposes a series of links between individual. managerial level. Similar to the requirements for dilemma identification and definition. (3) identifying organizational values and norms relevant to the ethical issue. Hence. Organizational systems that emphasize learning and open communication across levels facilitate information exchange regarding relevant stakeholders and provide input with respect to the impact of particular decisions based on well-informed risk analysis. we suggest that the relationship between the nature of the dilemma. organizational characteristics. changes in the workforce composition. the legal environment.e. organizational. and emphasis on social responsibility enlarge the scope of decision options and create dilemma situations where formerly a straightforward approach elicited the desired outcomes. and the alignment between organizational systems. and environmental variables. the fast-changing nature of the business environment presents novel situations that require the delineation of unique courses of action. However. the more likely it is that this individual has formed networks and possesses knowledge of the key stakeholders that will be impacted by business decisions. the decision-makers’ ability to recognize that a particular situation may represent an ethical dilemma is critical to the success of organizations. and cultural background). In addition. Furthermore. business experience. and (4) identifying legal regulations relevant to the ethical issue. Most organizational decisions concern routine procedures and lead to the anticipated outcomes. The organization’s ethical capability will also determine how effectively decision-makers anticipate the impact of business decisions and become aware of key individuals.g. the decision-makers ability to identify relevant stakeholders and the differential impact of ethical decisions on different stakeholders is highly dependent upon individual characteristics. A second step to making a sound decision with regard to an ethical dilemma involves the decision-maker’s capability to identify relevant stakeholders and the impact of the selected course of action on these individuals. (2) identifying relevant stakeholders and the impact of decisions on these stakeholders. individual differences (e.EBR 22. ethical capability) determine the extent to which decision-makers are able to recognize a situation as an ethical dilemma. Informed by extant research. gender. age. the decision-maker’s cultural background and gender will expectedly enhance awareness of the impact of administrative decisions and internal policies on minority strata of the workforce.

and the choice of a specific solution. In addition. experience level. Organizational values and procedural norms represent internal boundaries that determine important aspects of ethical conduct.g. We postulate that the interaction between individual-level variables (e. In addition. and the impact of prospective decisions on those stakeholders. Following the analysis of the ethical dilemma. or possessed by organizational members that have greater experience with local and/or international business environments.e. The last stage of the decision-making model involves the identification of external boundaries (i. decision makers must consider internal and external boundaries prior to proposing a course of action. and proposed a model that highlights the factors that intervene in the interpretation of ethical dilemmas. and information to permit the alignment between the organization’s direction and the proposed ethical decisions.Identify organizational values and norms relevant to the ethical issue. organizations with ethical capability will possess sound knowledge of business ethics and foster open communication systems that allow for that wealth of knowledge to disseminate across units and to adequately inform ethical decision making. and to adequately integrate organizational procedures with subsequent action courses. legal guidelines and other environmental factors) that influence the implementation of a particular decision. In practice. Taking into account empirical evidence from the existing literature allows decision-makers to survey their own reasons for adopting a specific ethical stance. and cultural background) and the organization’s ethical capability will determine the decision-maker’s ability to identify external boundaries and to consider them when making decisions. managerial level. The interaction between individual differences (e. the involvement of particular organizational members. In practice. Hence. namely decision latitude. the extra-organizational component of ethical capability encompasses a thorough knowledge of local and international codes of conduct for businesses that will more likely be accessible to individuals in top managerial positions. Acknowledgment of these factors serves to rectify common errors and biases in decision making. the accurate identification of organizational values and procedures relevant to ethical decision making will be facilitated when decision-makers possess sufficient experience. managerial position and level of experience) and ethical capability will expectedly influence the extent to which decision-makers are able to identify relevant organizational values and norms and use this knowledge to integrate ethical decisions with the organization’s mission and strategic direction. its characteristics. exposure. relevant stakeholders.g. which will restrict the range of reliable information a manager can gather to formulate decisions. Concluding remarks The present addressed some of the limitations of the extant literature and current research in ethical decision making. individuals with longer organizational tenure and occupying a higher position in the organization will have privileged access to strategic information and more familiarity with the organization’s mission and goals than individuals that are newer to the organization or that are not as involved in strategic planning activities. and to identify external Ethical decision-making 373 . We suggest that individual and organizational characteristics influence the decision-maker’s capacity to align ethical decisions with organizational values. dynamic environments will likely imply more flexible boundaries. Identify legal regulations and environmental characteristics relevant to the ethical issue.

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