Making Decisions in Business Ethics

Descriptive Ethical Theories

Majid Khan
Overview
• Examine the question of why ethical and unethical decisions get
made in the workplace
• Determine what an ethical decision is
• Review prominent ethical decision-making models
• Discuss the importance of differences between individuals in shaping
ethical decision-making
• Critically evaluate the importance of situational influences on ethical
decision-making (issues and context based)
• Identify points of leverage for managing and improving ethical
decision-making in business
Descriptive Ethical Theories

Descriptive business ethics theories seek to

describe how ethics decisions are actually made
in business, and what influences the process and
outcomes of those decisions.
What is an ethical decision?
Main factors in deciding the moral status of a
situation
• Decision likely to have significant effects on others. Photocopy your
textbook is morally wrong?
• Decision likely to be characterised by choice, in that alternative
courses of action are open
• Decision is perceived as ethically relevant by one or more parties.
Example – bank provide loan to a water dam project seen as unethical
by citizens who object to this project
Models of ethical decision-making
Stages in ethical decision-making

Recognise Make Establish Engage in

moral moral moral moral
issue judgement intent behaviour

These stages are intended to be conceptually distinct, this mean although one might
reach one stage of the model, this does not mean that one will necessarily move onto
the next stage. Salesmen that want to meet sales target may cheat their customers.

Source: Derived from Rest (1986), as cited in Jones (1991).

Recognise moral issue

• Recognizing the presence of an ethical issue is the first step in ethical

decision making because we can’t solve a moral problem unless we
first know that one exists.
• Empathy and perspective skills are essential to this component of
moral action.
• We may even deceive ourselves into thinking that we are acting
morally when we are clearly not, a process called ethical fading.
• We can take steps to enhance our ethical sensitivity.
Moral Judgement
• After determining there is an ethical problem, decision makers then
choose among the courses of action.
• They make judgments about what is the right or wrong thing to do in
this specific context.
• Moral judgment has been studied more than any other element of
the Rest model.
Moral Intent
• Sometimes individuals want to do the right thing, but their integrity
can be “overpowered”.
• Others never intend to follow an ethical course of action but engage
in moral hypocrisy instead.
• Both self-interest and hypocrisy encourage leaders to set their moral
principles aside.
• People are more likely to give ethical values top priority when
rewarded through raises, promotions, public recognition, and other
means for doing so.
• Emotions also play a part in moral motivation.
Engage in moral behaviour

• Executing the plan of action takes character.

• The positive character traits contribute to ethical follow-through -
courage, prudence, integrity, humility, reverence, optimism,
compassion.
• In addition to virtues, other personal characteristics such as a strong
will or internal locus of control contribute to moral action.
• Successful implementation also requires competence.
Relationship with normative theory
The role of normative theory in the stages of ethical decision-making is
primarily in relation to moral judgement
• Moral judgements can be made according to considerations of rights,
duty, consequences, etc.
• Commercial managers tend to rely on consequentialist thinking.
Remember Ford Pinto’s and Philip Morris’ cost benefit analysis?
• However, the issue of whether and how normative theory is used by
an individual decision-maker depends on a range of different factors
that influence the decision-making process
Influences on ethical decision-making
Two broad categories: individual and situational (Ford and Richardson 1994)
• Individual factors - unique characteristics of the individual making the relevant
decision
ØGiven at birth – like age and gender
ØAcquired by experience and socialisation - education, religion, personality, etc.
• Situational factors - particular features of the context that influence whether the
individual will make an ethical or unethical decision
• Work context
• The issue itself including
• Intensity
• ethical framing
Framework for understanding ethical
decision-making
Individual factors

Recognise Make moral Establish Engage in

moral issue judgement moral intent moral
behaviour

Situational factors
Limitations of ethical decision-making models
• Models useful for structuring discussion and seeing the different elements
that come into play
• Limitations
• Not straightforward or sensible to break model down into discrete units
• Various stages related or interdependent and difficult to separate out an
individual factor
• National or cultural bias as they are originated in US
• Model is intended not as a definitive representation of ethical decision-
making, but as a relatively simple way to present a complex process
Individual influences on ethical decision-
making
 Individual influences on ethical decision-making
Factor
Age and gender
National and cultural
characteristics
Education and employment
Psychological factors:
• Cognitive moral development
• Locus of control
Personal Values
Personal integrity
Moral imagination
Influence on ethical decision-making
Very mixed evidence leading to unclear associations with ethical decision-making.
Appear to have a significant effect on ethical beliefs, as well as views of what is
deemed an acceptable approach to certain business issues.
Somewhat unclear, although some clear differences in ethical decision-making
between those with different educational and professional experience seem to be
present.
• Small but significant effect on ethical decision-making.
• At most a limited effect on decision-making, but can be important in predicting
the apportioning of blame/approbation.
Significant influence – some empirical evidence citing positive relationship.
Significant influence likely, but lack of inclusion in models and empirical tests.
A new issue for inclusion with considerable explanatory potential.
Age and gender
• Age
• Results contradictory
• However, experiences may have impact
• Gender
• Individual characteristic most often researched
• Results contradictory
• These categories too simplistic
National and cultural characteristics
• People from different cultural backgrounds likely to have different beliefs
about right and wrong, different values, etc. and this will inevitably lead to
variations in ethical decision-making across nations, religions and cultures
• Hofstede (1980; 1994) influential in shaping our understanding of these
differences – our ‘mental programming’:
• Individualism/collectivism
• Power distance
• Uncertainty avoidance
• Masculinity/femininity
• Long-term/short-term orientation
• Indulgence
National and cultural characteristics
Ø Individualism/collectivism - degree to which one is autonomous and driven to act for the
benefit of one’s self, contrasted with a more social orientation that emphasizes group
working and community goals
Ø Power distance - extent to which the unequal distribution of hierarchical power and
status is accepted and respected
Ø Uncertainty avoidance - extent of one’s preference for certainty, rules and absolute
truths
Ø Masculinity/femininity - extent to which an emphasis is placed on valuing money and
things versus people and relationships
Ø Long-term/short-term orientation - difference in attention to future rewards, where
long-term-orientated cultures value perseverance (persistence) and thrift (hard working),
where short-term orientation emphasize more preservation of face, short-term results, and
fulfillment of social obligations
Ø Indulgence. This measures the degree to which societies permit or suppress gratification
of basic and natural human drives related to enjoying life and having fun.
Education and employment
• Type and quality of education may be influential
• E.g. business students are driven more by self-centred values and rank lower
in moral development than others and more likely to cheat
• commentators criticized the culture of greed had poisoned those working in
the banking and finance industry lead to 2008 financial crisis/tsunami
• ‘Amoral’ business education contains the idea that business is not
expected to be concerned with questions of morality reinforces myth
of business as amoral
Psychological factors

• Virtually all models of ethical decision making tend to utilize CMD theory
by Lawrence Kohlberg.
• Cognitive moral development (CMD) refers to the different levels of
reasoning that an individual can apply to ethical issues and problems
• 3 levels (details over the next two slides)
• LEVEL 1: Preconventional
• LEVEL 2: Conventional
• LEVEL 3: Post-conventional
• Kohlberg explains the different reasoning processes that individuals would use to make
ethical judgement as they matured through childhood into adulthood.
Stages of cognitive moral development (I)
Level Stage Explanation Illustration
Individuals define right and Whilst this type of moral reasoning is usually
1 Obedience wrong according to expected associated with small children, we can also
and rewards and punishments from see that businesspeople frequently make
punishment authority figures unethical decisions because they think their
company would either reward it or let it go
unpunished (see Gellerman 1986).
I Preconventional
Instrumental Individuals are concerned with An employee might cover for the absence of
2 purpose and their own immediate interests and a co-worker so that their own absences might
exchange define right according to whether subsequently be covered for in return – a
there is fairness in the exchanges “you scratch my back, I’ll scratch yours”
or deals they make to achieve reciprocity (Treviño and Nelson 1999).
those interests.
Interpersonal Individuals live up to what is An employee might decide that using
3 accord, expected of them by their company resources such as the telephone, the
conformity immediate peers and those close internet and email for personal use while at
II Conventional and mutual to them work is acceptable because everyone else in
expectations their office does it.
Individuals’ consideration of the A factory manager may decide to provide
4 Social accord expectations of others broadens to employee benefits and salaries above the
and system social accord more generally, industry minimum in order to ensure that
maintenance rather than just the specific employees receive wages and conditions
people around them. deemed acceptable by consumers, pressure
groups and other social groups.

Source: Adapted from Ferrell et al. (2002); Kohlberg (1969); Trevino and Nelson (1999)
 Stages of cognitive moral development (2)
Level Stage Explanation Illustration
5 Social Individuals go beyond The public affairs manager of a food
contract identifying with others’ manufacturer may decide to reveal which
and expectations, and assesses right of the firm’s products contain genetically
III individual and wrong according to the modified ingredients out of respect for
rights upholding of basic rights, consumers’ rights to know, even though
values and contracts of society. they are not obliged to by law, and have
not been pressurised into by consumers or
Postconventional anyone else.
6 Universal Individuals will make decisions A purchasing manager may decide that it
ethical autonomously based on self- would be wrong to continue to buy
principles chosen universal ethical products or ingredients that were tested
principles, such as justice, on animals because he believes this
equality, and rights, which they doesn’t respect animal rights to be free
believe everyone should follow. from suffering.
Personal values, integrity & moral imagination
Personal values
• ‘an enduring belief that a specific mode of conduct or end-state of
existence is personally or socially preferable to an opposite or converse
mode of conduct or end-state’ (Rokeach 1973:5). Common values include self-
respect, freedom, equality, responsibility and honest. Total more than 70.
Personal integrity
• Defined as an adherence to moral principles or values, a consistency in
one’s beliefs and actions
Moral imagination
• Concerned with whether one has “a sense of the variety of possibilities and
moral consequences of their decisions, the ability to imagine a wide range
of possible issues, consequences, and solutions” (Werhane, 1998:76)
Situational influences on decision-making
Situational influences on ethical decision-
making
Type of Factor Influence on ethical decision-making
factor
Moral intensity Reasonably new factor, but evidence suggests significant effect on ethical decision-
Issue-related making.
Moral framing Fairly limited evidence, but existing studies show strong influence on some aspects of
the ethical decision-making process, most notably moral awareness.
Rewards Strong evidence of relationship between rewards/punishments and ethical behaviour,
although other stages in ethical decision-making have been less investigated.
Authority Good general support for a significant influence from immediate superiors and top
management on ethical decision-making of subordinates.

Context- Bureaucracy Significant influence on ethical decision-making well documented, but actually
related exposed to only limited empirical research. Hence, specific consequences for ethical
decision-making remain contested.
Work roles Some influence likely, but lack of empirical evidence to date.

Organizational Strong overall influence, although implications of relationship between culture and
culture ethical decision-making remain contested.

National Context Limited empirical investigation, but some shifts in influence likely.
Moral Intensity
• Importance of the issue to the decision maker. Jones (1991:374-8)
proposes that the intensity of an issue will vary according to six factors:
ØMagnitude of consequences – expected sum of the harms/benefits for those
impacted by the problem/action
ØSocial consensus - degree to which people are in agreement over the ethics of
the problem or action. Moral intensity is likely to increase when it is certain
that an act will be deemed unethical by others
ØProbability of effect - likelihood that the harms/benefits are actually going to
happen
Moral Intensity
Ø Temporal immediacy - speed with which the consequences are likely to occur.
When outcomes are likely to take years to have much effect, decision makers may
perceive moral intensity as low
Ø Proximity - feeling of nearness (social, cultural, psychological or physical) the
decision maker has. For example, poor working condition in factories in a far away
developing country might be seen as less intense moral issue
Ø Concentration of effect - extent to which the consequences of the action are
concentrated heavily on a few, or lightly on many. For example, containment of milk
scandals that led to death of six babies in china in 2008 is a case of high moral
intensity
Moral Framing
• The same problem or dilemma can be perceived very differently according
to the way that the issue is framed
• Language important aspect of moral framing (using moral language likely to trigger
moral thinking)
• Giving money to officer can said to be corruption or gift.
• Moral muteness (Bird & Walters 1989) because of concerns regarding
perceived threats to:
ØHarmony - moral talk provoke confrontation and finger-pointing
ØEfficiency - moral talk could cloud issues
ØImage of power and effectiveness – managers’ own image might suffer since being
associated with ethics could be seen as idealistic and naïve, and lacking sufficient robustness
for effective management
 How ethical decisions are justified:
rationalization tactics
Strategy Description
Denial of responsibility The actors engaged in corrupt behaviours
perceive that they have no other choice than to
participate in such activities.
Denial of injury The actors are convinced that no one is harmed
by their actions; hence the actions are not really
corrupt.
Denial of victim The actors counter any blame for their actions
by arguing that the violated party deserved
whatever happened.
Social weighting The actors assume two practices that moderate
the salience of corrupt behaviour: 1. Condemn
the condemner, 2. Selective social comparison.
Appeal to higher The actors argue that their violation of norms is
loyalties due to their attempt to realize a higher-order
value.
Metaphor of the ledger The actors argue that they are entitled to
indulge in deviant behaviours because of their
accrued credits (time and effort) in their jobs.
Examples
“What can I do? My arm is being twisted.”
“It is none of my business what the corporation
does in overseas bribery.”
“No one was really harmed”
“It could have been worse.”
“They deserved it.”
“They chose to participate.”
“You have no right to criticise us.”
“Others are worse than we are.”
“We answered to a more important cause.”
“I would not report it because of my loyalty to my
boss.”
“It’s all right for me to use the internet for personal
reasons at work. After all, I do work overtime.”
1. Systems of reward
Adherence to ethical principles and standards stands less chance of
being repeated and spread throughout a company when it goes
unnoticed and unrewarded
• “What is right in the corporation is not what is right in a man’s home.
What is right in the corporation is what the guy above you wants from
you. That’s what morality is in the corporation” (Jackall, 1988:6)
• Salespeople will be tempted to compromise ethical standards in their
dealings with customers in order to earn more commission. This
would be particularly true if the organization did not appear to punish
those salespeople who were sent to behave unethically towards their
customers
2. Authority and Bureaucracy
Authority
• People do what they are told to do – or what
they think they’re being told to do
• Recent survey of government employees
(Ethics Resource Center, 2008: 9):
• 20% think top leadership is not held
accountable
• 25% believe top leadership tolerates
retaliation against those reporting ethical
misconduct
• 30% don’t believe their leaders keep promises
Bureaucracy
• Jackall (1988), Bauman (1989, 1993) and ten
Bos (1997) argue bureaucracy has a number
of negative effects on ethical decision-making
• Suppression of moral autonomy and
employee act as moral robots that simply
follow the rules
• Instrumental morality
• Distancing due to division of labor
• Denial of moral status due to dividing
task
 3. Work roles and organizational norms and
culture
Work roles
• Work roles can include a whole
set of expectations about what
to value, how to relate to others,
and how to behave
• Can be either functional or
hierarchical
Organizational norms and
culture
• Group norms delineate
acceptable standards of
behaviour within the work
community
• E.g. ways of talking, acting,
dressing or thinking
4. National and cultural context
• Instead of looking at the nationality of the individual making the
decision; now we are considering the nation in which the decision is
actually taking place, regardless of the decision-maker’s nationality
• A US human resources manager might consider the issue of
employment conditions quite differently should she/he be working in
Pakistan rather than at home
• Different cultures still to some extent maintain different views of
what is right and wrong
Summary
We have:
• Discussed the various stages of and influences on ethical decision-making
in business
• Presented basic model of decision-making
• Outlined individual and situational influences on ethical decision-making
• Suggested that some individual factors – such as cognitive moral
development, nationality and personal integrity – are clearly influential
• Suggested that in terms of recognising ethical problems and actually doing
something in response to them, it is situational factors that appear to be
most influential
Stuck in the middle?
You have recently been appointed to the position of civil engineer in a small town in a developing country. You are responsible for the maintenance of the
town's infra¬ structure, such as public buildings and roads. You are one of the youngest members of the senior management team and report directly to
the Director of Public Works.
All the members of the management team have been working for the organization for a very long time, and you feel like something of an outsider. The
Director of Public Works, the Human Resources Director, and the CEO often have lunch together, and it is generally felt that most important
organizational decisions are taken over lunch.
Your position had been vacant for a long time prior to your appointment and the Director of Public Works had assumed responsibility for a number of
your current responsibilities. On your appointment, your manager asked you to bounce off any major decisions with him before implementing them. He
also retained the authority to approve major works.
After some time, you realized that despite having a full staff complement, a number of outside contractors were doing various jobs within the
organization. When you queried this, the Director simply put it down to 'rusty skills', 'a significant backlog', and 'quality of work'. However, you have been
impressed with the quality of work that your staff had produced on odd maintenance jobs that you have assigned. Recently, when you were
complimenting one of your supervisors on the way he handled an emergency, he expressed his frustration at being given the 'boring, odd jobs' instead of
the 'challenging' projects given to contractors.
You decided to utilize your own staff rather than contractors for the next project because you felt that you would be able to supervise the work better
and ensure the right quality. You planned it meticulously and wanted to enlist the support of your manager to ensure that all went well. You prepared all
the paperwork and took it to your manager for discussion. He looked disinterested and simply asked you to leave the paperwork with him because he
was preparing for a meeting.
The following week, your manager informed you that he had gone through your paperwork and asked one of the more experienced contractors to submit
a proposal for the job. He told you that he had already discussed this issue with the CEO, because he felt that this was a critical job and the contractors
would complete the work within a shorter time than the internal staff. You were very upset about this and asked your manager why he had not involved
you in the decision-making process. You are increasingly uncomfortable that you are expected to supervise and authorize payments for contractors
whose appointment to you seems questionable.
Questions
• What is the right thing to do in this situation from an ethical point of view? What ethical theory supports your position?
• If you were the civil engineer, what would you actually do? Is your response to this question different to your response to question 1? If so, why?
• What are the factors that influenced your decision/action?
• Do you think that everybody that reads this dilemma will make similar decisions? Why?