Business Ethics

Process of Ethical Decision Making in Business

Individual differences and Ethical judgment
Cognitive barriers to a good ethical judgment
 Deciding what's right
 2 approaches to individual ethical decision
making
• Prescriptive approach
What should you do as a
conscientious(what is right or wrong)
moral agent
• Descriptive approach
Psychological process of ethical decision
making
 Prescriptive approaches
 Prescriptive approaches to ethical decision
making applied to business ethics
• Focus on consequences
Consequentialist theories
• Focus on duties, obligations and principles
Deontological theories
• Focus on integrity
Virtue Ethics
 8 steps to sound ethical decisions
1. Gather the facts
2. Define the ethical issues
3. Identify the affected parties
4. Identify the consequences
5. Identify the obligations
6. Consider your character and integrity
7. Think creatively about potential actions
8. Check your gut
 Practical Guidelines - No. 1
 Do your homework
• Be prepared
• Read the company code of ethics
• Ask questions
• Create a network
 Practical Guidelines - No. 2
 When asked to take a snap decision
• Follow your instincts
• Ask for time
• Check out organization’s policy
• Ask managers and peers for advice
• Use the New York Times test
 Can the decision be misinterpreted?
 Descriptive approach
 When people behave morally, they must:-

 Decide what course of action is morally

right
 i.e. Choose the morally right path over
others
 Follow the decision through action
 Psychological approach
 Individual differences or characteristics
affecting and ethical conduct and moral
judgment
1. Cognitive Moral Development
2. Locus of Control
 Cognitive Moral Development
 Moral reasoning theory by Lawrence
Kohlberg
 58 American boys, age 12-16, interviewed
every 3 years over a 12 year period, on
hypothetical moral dilemmas using open
ended questions
 Kohlberg’s Moral Reasoning
 3 Levels of Cognitive Moral Development
according to Kohlberg

• Level 1 – Pre conventional

• Level 2 – Conventional
• Level 3 – Post conventional or Principled
 Kohlberg’s
Three Levels of Moral Development
 Level 1: Pre conventional level (self-
orientation)
• Stage 1: Punishment avoidance
• Stage 2: Reward seeking
 Level 2: Conventional level (others
orientation)
• Stage 3: Good person
• Stage 4: Law and order
 Level 3: Principles level (universal,
humankind orientation)
• Stage 5: Social contract – societal consensus
• Stage 6: Universal ethical principles – universal,
consistent, and comprehensive principles

Weiss, Business Ethics, chapter 1

 Level 1 – Pre conventional
 Stage 1 – obedience and punishment
orientation
• Sticking to rules to avoid punishment
 Stage 2 – instrumental purpose an exchange
• Following rules in one’s interest, expecting a
fair deal
 Level 2 - Conventional
 Stage 3 – Interpersonal accord, conformity,
mutual expectations
• Living up to what is expected by society –
“good” behavior
 Stage 4 – Social accord and system
maintenance
• Fulfilling duties, upholding laws and
contributing to the society
 Level 3 – Post conventional
 Level 5 – Social contract and individual
rights
• Being aware of differences in relative
values and rules. Upholding rules and non
relative values because they are the social
contract
 Stage 6 – Universal ethical principles
• Following self chosen ethical principles of
justice and rights
 Locus of Control
 Individual’s perception of how much control
he or she exerts over the events in life
• Internal and External
 Develops over time through interaction with
environment
 Is a continuum and can shift

Internal
 Cognitive Barriers to
Good Ethical Judgment
 There are cognitive weaknesses and biases in
how people make ethical and other decisions
 They operate primarily because people try to
reduce uncertainty an simplify their world.
 People try to act as if the world is rational and
they’re in control
 Focus on the illusion of being “in charge”
 7 Cognitive Barriers
1. Script Processing
• Scripts are cognitive frameworks that
guide human thought and action
• Cognitive script allows the individual to
call on an established behavior pattern or
mental prototype and act automatically
without contemplating every case in detail.
• Active thinking is not required
• Enables quick decisions
2. Cost – Benefit analysis
3. Thinking about fact gathering
• Confirmation trap
4. Thinking about consequences
• Reduced number of consequences
• Consequences at risk
 Illusion of optimism
 Illusion of control
• Consequences over time – escalation of
commitment
5. Thinking about integrity
 Illusion of superiority
6. Thinking about your gut