Unit 4 – Ethical Decision Making in Business

Unit no. 4 - Ethical Decision Making in Business

4.1. Determinants of Ethical Decision-Making in Business

4.2. Ethical Models for Making Business Decisions

4.3. Constraints in Ethical Decision-Making and Implementation

4.4. A framework for Good Ethical Decision-Making in Business

4.1. Determinants of Ethical Decision-Making in Business:

By “determinants of business ethics” we assume, it is those determines - how ethically (or
unethically) people and organizations behave in business?
There are several likely factors/determinants of Ethical decision making, like-
1. Individual upbringing & socialization: What values did your parents teach you & what
values did you acquire through other formative experiences (e.g., early jobs, clubs,
religion, etc.)
2. Organizational structure & Organizational culture: If your boss offers you incentives to
sell more (& more) you may find yourself tempted to behave badly in order to do so.
3. Peer pressure: We are social animals. We tend to copy each other’s behaviour, and take
our cues for appropriate behaviour from close associates.
4. Rationalizations: We all have a tendency to rationalize our behaviour — that is, to offer
little explanations or re-descriptions that make our bad behaviour seem OK.
Classic rationalizations include ‘Everybody does it!’ and ‘I was only following orders’.
Rationalizations can be emotionally appealing, but they are typically very poor arguments.
Some people find rationalizations hard to resist & some organizations encourage them,
which leads to bad behaviour.
5. Laws, regulations, and codes of conduct: Ethics isn’t the same as law, but laws can often
provide guidance (e.g., there are good ethical reasons why bribery is illegal everywhere
on earth!) & good regulations (ethics codes) can provide useful reminders of what the
‘rules of the game are’ when people forget.

1 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

4.2. Ethical Models for Making Business Decisions

Sometimes, people consider understanding the obligations of public relations professionals
as a science. The ability to apply ethical reasoning into a tapestry of various situations,
however, is truly an art. In an attempt to address this, many scholars have proposed ethical
decision-making processes/models, based on ethical frameworks previously addressed or in
their own way, the way their research has turned into.

1. Decision making models fall into two general categories: Rational & Intuitive. These two
broad categories provide variations to arrive at a decision in any situation.
a) The rational decision making model includes ‘Vroom-Jago’ system & a 7-step process.
Rational decision making models employ a structured approach that is orderly &
logical. A sequence of steps starts with identifying the problem or situation at hand,
followed by compiling all the facts & information necessary to create a solution. Next,
the data is analyzed for various options to determine which action might achieve the
desired result. The final step involves acting on the preferred option & setting aside
adequate resources to make it work.

The ‘Vroom-Jago’ system guides a manager in determining if he/she should make the
decision independently or include colleagues.
 For simple problems, a manager typically acts alone; in other situations, he/she may
speak with coworkers separately to outline the situation but does not seek
feedback.
 For more complex issues, the manager might call a group meeting to solicit input
before the group reaches a consensus on a solution.

b) Intuitive decision making models represent a subjective way to find a solution. It

employs gut feeling, knowledge, and making judgment calls. The manager might use
his or her values, ethics, and emotions, along with past experience, to solve a problem.
Leaders commonly use this technique when decisions must be made quickly and there
is not enough time to gather all the facts.

Heuristic decision making is based on the intuitive model, with three subcategories
defined as shortcuts when time is scarce.
 Representative heuristics means making a decision based on what appears familiar.

2 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

 Anchor heuristics uses a value system to quickly devise a solution in an emergency

situation.
 Availability heuristics relies on memory and past experiences, along with known
facts, to reach a decision.

Recognition-primed decision making models are considered intuitive methods. The

recognition primed model helps a manager learn to recognize patterns that can be
mentally weighed. He or she recalls experiences in the past when a particular solution
worked and determines if the same process might be effective in the current dilemma.
As a person’s experience grows, his or her ability to recognize patterns improves to
make decision making more effective.

But, still, many Managers and leaders often combine rational and intuitive models
when faced with a problem or opportunity.

2. PLUS Ethical Decision-Making Model:

No model is perfect, but this is a standard way to consider four vital components that
have a substantial ethical impact. To create a clear and cohesive approach to
implementing a solution to an ethical problem; the model is set in a way that it gives the
leader “ethical filters” to make decisions.

The letters in PLUS each stand for a filter that leaders can use for decision-making:
 P – Policies & Procedures: Is the decision in line with the policies laid out by the
company?
 L – Legal: Will this violate any legal parameters or regulations?
 U – Universal: How does this relate to the values and principles established for the
organization to operate? Is it in tune with core values and the company culture?
 S – Self: Does it meet my standards of fairness & justice? This particular filter fits well
with the virtue approach that is a part of the common standards.

These filters can even be applied to the process, so leaders have a clear ethical framework
all along the way. Defining the problem automatically requires leaders to see if it is
violating any of the PLUS ethical filters. It should also be used to assess the viability of any
decisions that are being considered for implementation & make a decision about whether
the one that was chosen resolved the PLUS considerations questioned in the first step.

3 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

3. The Character-Based Decision-Making Model:

While this one is not as widely cited as the PLUS Model, it is still worth mentioning.
The Character-Based Decision-Making Model was created by the Josephson Institute of
Ethics & it has three main components leaders can use to make an ethical decision.
a) All decisions must take into account the impact to all stakeholders – This is very similar
to the Utilitarian approach discussed earlier. This step seeks to do good for most, and
hopefully avoid harming others.
b) Ethics always takes priority over non-ethical values – A decision should not be
rationalized if it in any way violates ethical principles. In business, this can show up
through deciding between increasing productivity or profit and keeping an employee’s
best interest at heart.
c) It is okay to violate another ethical principle if it advances a better ethical climate for
others – Leaders may find themselves in the unenviable position of having to prioritize
ethical decisions. They may have to choose between competing ethical choices, and
this model advises that leaders should always want the one that creates the most good
for as many people as possible.
Making good ethical decisions requires a trained sensitivity to ethical issues & a practiced
method for exploring the ethical aspects of a decision & weighing the considerations that
should impact our choice of a course of action. When practiced regularly, the method
becomes so familiar that we work through it automatically without consulting the specific
steps. The more novel & difficult the ethical choice we face, the more we need to rely on
discussion & dialogue with others about the dilemma. Only by careful exploration of the
problem, aided by the insights & different perspectives of others, we can make good
ethical choices in such situations.

4. Bowen's Model for Strategic Decision Making: This model for ethical decision-making is
specifically designed to help with issues management i.e., it helps professionals make
correct decisions in a mgmt. process in order to avoid ethical problems & crises. In this
model, Bowen suggests first ensuring that the professional is autonomous in the decision
making process i.e., it is important in this model that the public relations professional is
free of outside influences that may change what choices they would make. Then the
model guides the professional into making a decision based on considerations for the key
duties to the client & publics.

4 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Here the professionals are encouraged to consider whether others in similar situations
could be obligated to perform the same way, whether they would still make the same
decision? If they were on the receiving end of the choice & whether similar situations like
this have been faced before?

After making the decision, there is also guidance on how to communicate the choice. The
professional shall ask questions - “am I doing the right thing?” & “am I proceeding with a
morally good will?”

5. TARES Ethical Persuasion: Often, public relations professionals are communicating

messages designed to influence values, opinions, beliefs and behaviors. When using
persuasive communication, there are certain ethical obligations that the communicator
holds. The TARES model is a guide for this kind of communication. In other words, the
public relations professional needs to make sure their communication aligns with each of
these five areas prior to using it.
T - Truthfulness (of the message),
A - Authenticity (of the persuader),
R - Respect (for the persuadee),
E - Equity (of the persuasive appeal) and
S - Social Responsibility (for the common good).

6. Potter’s Box for Decision Making: This is perhaps one of the most simple but often
employed models for making ethical decisions. This model was developed by social ethics
professor, Ralph Potter and is often used in a variety of professions.
This process guides individuals through a four step process involving
a) examining the issue at play in the situation;
b) identifying values that should be employed,
c) recognizing guiding principles and
d) ascertaining loyalties that should be employed.
This model is one that rests on professionals understanding principles, values and
loyalties in order to be able to navigate the ethical choice correctly.

5 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

4.3. Constraints in Ethical Decision-Making and Implementation

Ethical Decision Criteria –
 Utilitarianism - Seeking the greatest good for the greatest number.
 Rights - Respecting and protecting basic rights of individuals.
 Justice - Imposing and enforcing rules fairly and impartially.

Constraints in Ethical Decision-Making:

Decision making involves a great degree of value clarity, ethical decision making involves
more! Unlike certain financial, inventory and production decisions, ethical decisions cannot
be coded into digital machines. They require critical thinking and evaluation.
In an era of uncertainty, it is almost impossible to predict the outcomes of decision
making. One of the principles of ethical decision making assumes that the outcome of a
decision is known and that the decision that results in greatest good for greater number of
people is the best. Practically, anticipating the exact outcome of a course of action is
impossible. This uncertainty is at the root of all difficulties in ethical decision making.

Lastly we may say that ethical stand points of organization and their critics are opposite and
based on an entirely different set of reasons; here the ethical arguments made to justify
intentions are by and large incompatible e.g., an environment protection foundation may
criticize the operations of an organization on grounds of the latter polluting the
environment. The organization may justify itself by saying that it is adding more value to the
society and to individual lives, making it more comfortable by its products and services.

What makes ethical decision making so difficult? Why cannot ethical decisions be
programmed like other decisions? What leads to dilemmas in ethical decision making? In the
coming paragraphs we try to answer all these questions. We also try to understand basic
difficulties involved in ethical decision making.
 An organization is an amalgamation of various individuals and there is a conflict of
interest at the personal level between these members, each one is concerned about his
benefits and neutral or opposing to the benefits or good of others. This conflict of interest
leads to situations that are morally challenging to the manager who wants to be moral
and righteous to his own conscience and serve the interests of the organization. Here the
dilemma arises on deciding upon the course of action.

6 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

 In the second case a conflict arises when there is a distinction to be made about facts and
values. This implies a situation where a manager confronts ‘what is’ and weighs the same
against ‘what ought to be’. For example an organization may spend lots of resources upon
developing, researching or upgrading a certain product and service, which gets reflected
in the final price of the latter. This increase in price may be looked upon as exploitative by
the end users!
 Yet another difficulty arises in cases when there is a fine line dividing the good from the
bad or the evil and in situations when there is a difference of opinion on what is morally
permissible & what is not. Undoubtedly, in our society the good & the evil exist side by
side e.g., Nestle infant formula lead to many deaths in Kenya because the formula was
prepared in contaminated water. The same formula proved life saving in other countries.
The challenge lies in minimizing the evil & trying to arrive upon a consensus.

Organizational Constraints on Decision Makers: The organization itself constrains decision

makers and thus can create deviations from the rational model.
 Performance Evaluation – Evaluation criteria influence the choice of actions. Managers
are strongly influenced in their decision making by the criteria on which they are
evaluated. If a division manager believes that the manufacturing plants under his
responsibility are operating best when he hears nothing negative, we should not be
surprised to find his plant managers spending a good part of their time ensuring that
negative information does not reach the division boss. Similarly, if a college dean believes
that an instructor should never fail more than 10% of her students and to fail more
reflects on the instructor’s ability to teach. As we should expect that instructor who want
to receive favorable evaluations will decide not to fail too many students.
 Reward Systems – Decision makers make action choices that are favored by the
organization. The organizational reward system influences decision makers by suggesting
to them what choices are preferable in terms of personal payoff. For example, if the
organization rewards risk aversion, manager are likely to make conservative decisions.
From the 1930s through the mid-1980s, General Motors consistently gave out promotions
and bonuses to managers who kept a low profile, avoided controversy, and were good
team players. The result was that GM managers became very adept at dodging tough
issues and passing controversial decisions on to committees.

7 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

 Formal Regulations – Organizational rules and policies limit the alternative choices of
decision makers. All but the smallest of organizations create rules, policies, procedures,
and other formalized regulations in order to standardize the behavior of their members.
By programming decisions, organizations are able to get individuals to achieve high levels
of performance without paying for the years of experience that would be necessary in the
absence of regulations. And of course, in so doing, they limit the decision makers’ choices.
 System-imposed Time Constraints – Organizations require decisions by specific
deadlines. Imposed Time constraints Organizations impose deadlines on decisions. For
instance, department budgets need to be completed by next Friday. Or the report on
new- product development has to be ready for the executive committee to review by the
first of the month. A host of decisions must be made quickly in order to stay ahead of the
competition and keep customers satisfied.
 Historical Precedents – Past decisions influence current decisions. Managers, for
instance, shape their decisions to reflect the organizational performance evaluation &
reward system, to comply with the organizational formal regulations, and to meet
organizationally imposed time constraints. Previous organizational decisions also act as
precedents to constrain current decision.

Decisions aren’t made in a vacuum, they have a context. In fact, individual decisions are
more accurately characterized as points in a stream of decisions. Government budget
decisions also offer an illustration of our point. It’s a common knowledge that the largest
determining factor of the size of any given year as budget is last year’s budget.

And almost all important decisions come with explicit deadlines. These conditions create
time pressure on decision makers and often make it difficult, if not impossible, to gather
all the information they might like to have making a final choice.

Choices made today, therefore, are largely a result of choices made over the years. The
inference is that these organizational constraints inhibit fresh ideas and decisions in view
of the past actions. It is possible that the new ideas could have outperformed the old
methodology but the managers are not willing to take a high risk due to fear of failure
which may antagonize the top management. That is how the organization acts as a
constraint.

8 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Ten barriers to ethical decisions: Coleman suggests 10 barriers to the ethical problem
solving process.
They are-
1. Lack of knowledge of Ethical Standards
2. Financial Incentives
3. Perfectionism
4. Fear of Criticism/Scrutiny by Others
5. High Affiliative Needs
6. Personal and/or Professional Immaturity
7. Counselor Substance Abuse
8. Lack of Personal Values Clarification
9. Limitations of Codes of Ethics and Conduct
10. Lack of a Decision Making Model

1. Lack of Knowledge of Ethical Standards - Society is fast paced and ever changing.
Counselors’ are obliged to remain committed to ongoing learning and development
within the profession. This includes continuing awareness of relevant ethical codes and
standards. It also incorporates knowledge of legal standards and laws. Ignorance is not a
defense. Counselors’ can overcome this obstacle through personal commitment to
professional development and maintaining professional memberships.

2. Financial Incentives -
i) Ethical dilemmas often present in the form of gifts or rewards offered to the counselor
either directly by the client, or indirectly through an agency.
ii) A counselor may justify the acceptance of such gifts/rewards by undervaluing the
monetary value of their role.
iii) Coleman considers that counselors’ rationalize this behaviour by telling themselves
that they are underpaid and deserve it.
iv) This barrier often inhibits the counselor at the beginning of the ethical decision making
process stopping them from adequately clarifying the problem.
v) Reaffirming the reason for entering the counseling profession may assist the counselor
in overcoming this obstacle.

9 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

3. Perfectionism -
i) A large barrier at the implementation stage of the ethical problem solving process is
the counselor’s fear of not making a good decision.
ii) A counselor may become over concerned with ‘doing the right thing’, so much so that
they are unable to put the decision into practice. Coleman (n.d) proposes that
counselors acknowledge that there is rarely one ‘right’ choice and to look beyond self.

4. Fear of Criticism/Scrutiny -
i) No one likes to be criticized and counselors are no different.
ii) It is however, inevitable that the decision taken will not be popular with all.
iii) To overcome the fear, a counselor needs to accept that the choice they have made is
the correct one for the situation and that not everyone will be pleased.

5. High Affiliative Needs -

i) This barrier often accompanies perfectionism.
ii) Many counselors have a need to be liked and ethical decisions may not always be
popular.
iii) This need can leave the counselor open to manipulation.
iv) Personal awareness can help the counselor overcome this barrier.

6. Personal and/or Professional Immaturity -

i) Coleman (n.d) identifies immaturity as acting impulsively without any conviction.
ii) Immaturity involves acting on and implementing decisions that satisfy the counselor
first, often without any consideration to the client.
iii) The use of an ethical problem solving model can assist in conquering this barrier.

7. Counselor Substance Abuse - Stress within any profession can lead to substance abuse,
counselors too are vulnerable. The counselor who acts under the influence of alcohol or
other substances is putting themselves, their client/s and the profession at harm.
Counselors need to be aware of the effect personal issues may have on themselves, how
it transcends to their professional life and how they deal with said issues (Corey, Corey
and Callanan 2007).

10 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

8. Lack of Personal Values Clarification -

i) Commitment to ongoing professional growth is facilitative and required.
ii) Counselors also need to be dedicated to personal development and knowledge of
self/values.
iii) As with professional development this is an ongoing reflection.
iv) Failure to do this could result in the counselor becoming stuck and lacking the maturity
to undertake sound ethical practice.
9. Limitations of Codes of Ethics and Conduct - Stein (1990) identifies a number of
limitations pertaining to ethical codes. They are:
i) Written in broad, general terms not specific to any one particular situation.
ii) Can conflict with other Codes or regulations
iii) Reactive rather than proactive
iv) Silent or blind to some situations/problems
v) Vital to remain alert to the Ethical Codes offered by professional memberships and
acknowledge limits.
10. Lack of a Decision Making Model - Decisions that are made impulsively fail to
acknowledge the extent of the dilemma and the process. A clear structure to follow
means that the decision made is more likely to be ‘morally acceptable, clinically
appropriate and suit both the client and the counselor’s interests’ (Coleman, n.d., p9).

11 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Ethical Decision Implementation:

Ethical Dilemma/Barriers - Here we focus on five barriers to conducting in business in an
ethical manner. They provide an analysis of each barrier & suggest possible remedy each of
the barriers. While we note that compliance policies and procedures to implement business
ethics are important, they feel that even the best intentioned [compliance] program will fail
if it does not take into account biases which can blind management and employees to
unethical behavior.
1. Ill Conceived Goals - The authors define this barrier as a goal or incentive to promote
change or a behavior that encourages a negative one. They cite to the example of the Ford
Pinto where the Ford Motor Company discovered in pre-production crash tests the
“potential danger of ruptured fuel tanks.” Ford then engaged in a thorough and exhaustive
cost-benefit analysis on the costs of lawsuits from a defective product and “determined that
it would be cheaper to pay off lawsuits than to make repairs.” The authors end by noting
that “a host of psychological and organizational factors diverted the Ford executives
attention from the ethical dimensions of the problem…” As a remedy the authors suggest
that business leaders must understand the incentive systems which their company has in
place and the effect that it has on the workforce. They suggest “brainstorming unintended
consequences when devising goals and incentives.” Management should also consider
alternative goals may be important to the reward.
2. Motivated Blindness - The authors understand that people most often see what they
want to see. But they suggest that this is something further, the companies will overlook
unethical behavior when it is their interest to do so. They cite to the example of the failures
of the credit rating agencies which contributed to the economic downturn. These credit
rating agencies provided AAA credit ratings to “collateralized mortgage securities of
demonstrably low quality” and the authors believe this helped drive the crisis in the housing
market. The motivated blindness came from the fact that the credit rating agencies were
paid by the same companies that they rated so that they “made their profits by staying in
the good graces of the companies that they rate.” These conflicts of interest can be quite
powerful, even if a company or an individual employee is aware of them. The authors
suggest that a company “root out conflicts of interest” because awareness of them may not
be enough to protest a company from such ethical lapses. Executives should look to “remove
them from an organization entirely, looking particularly at the existing incentive systems.”

12 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

3. Indirect Blindness - Unfortunately a company will often overlook unethical behavior in

other companies. This is the classic situation where a company with strong ethical values
employees an agent or other third party representatives whose conduct may not meet a
company’s ethical standard. In this barrier the authors cite to the example of the drug
company Merck which sold two cancer drugs to the company Ovation. Soon after the sale,
Ovation raised the prices on the two cancer drugs by “about 1000%” while Merck actually
kept producing the two drugs. The authors assume that Merck sold the two drugs to Ovation
so that Ovation could raise the price and not Merck.
The authors decry this outsourcing of unethical “dirty work”. Even if Merck did not know
that Ovation would increase the price so dramatically the authors believe that any amount
of due diligence on Ovation would have revealed that “it had a history or buying and raising
the prices on small-market drugs…” Any company which has such a business representative
should understand whom it is doing business with and that it cannot outsource unethical
behavior or assign a task which might invite unethical behavior.
4. The Slippery Slope - Every law student is taught how to argue down the slippery slope.
You start at Point A and pretty soon you have come to the end of western civilization as we
know it. However the authors turn this phrase, so that they define it that companies often
fail to “notice the gradual erosion” of ethical standards. Under this barrier the authors cite to
the example of company auditors who find minor violations by their client company over
several years and which by the final year the has become a large violation or error. As the
outside auditors overlooked it all along, they might well overlook it when it becomes a
violation.
As a remedy for this barrier, the authors maintain that vigilance is necessary. Managers
should be on the look-out for even trivial-seeming infractions but the real key is to address
them immediately and not let them drag out. Additionally, there should be some type of
inquiry to determine if a change in behavior has occurred.
5. Overvaluing Outcomes - The authors’ final barrier is that they believe that many
companies will “reward results rather than high-quality decisions.” This can lead to
companies rewarding unethical decisions because such decisions have a good outcome. But,
as the authors note, this can be “a recipe for disaster over the long term.” The authors
believe that companies will judge their employees actions on whether any harm may follow
from an action, rather than focus on the ethicality of the decision or action.

13 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Many of us believe that, this final barrier can be overcome by having the possible outcomes
of any decision or action analyzed for both good and bad ethical implications. Focusing on
the process of decision making is much more important than simply accepting the outcome.
Companies should examine behaviors which “drive good outcomes, and reward quality
decisions, not just the results.”
Hence, we conclude by noting that, companies should not simply employ ‘surveillance &
sanctioning systems’ but train leaders to avoid the types of biases which can lead to the
barriers listed in this article. The end by noting that, each employee should be trained to ask
the following question, “What ethical implications might arise from this decision?” And this
advice may be the most important take-away from the article.

Resolving Ethical Dilemma (Implementation): In a business setting mangers are put to test
when they face the challenge of resolving an ethical dilemma. Often certain situations do not
fall in the ambit of procedures or the official code of conduct and this is when the managers
feel the heat.
The problem with ethical decision making is that a decision in itself cannot be taken in a
vacuum; one single decision affects lots of other decisions and the key is to strike a balance
to ensure a win-win situation is arrived upon.

Though there are no golden rules to resolve ethical issues but managers can take a number
of initiatives to resolve ethical issues. A brief description is given below.
 Know the Principles - In ethical decision making there are three basic principles that can
be used for resolution of problem. These three principles are that of intuitionism, moral
idealism and utilitarianism.

The principle of intuition works on the assumption that the HR person or the manager is
competent enough to understand the seriousness of the situation and act accordingly,
such that the final decision does not bring any harm to any person involved directly or
indirectly.

The principle of moral idealism on the other hand states that there is a clear distinction
between good and bad, between what is acceptable and what is not and that the same is
true for all situations. It therefore asks to abide by the rule of law without any exception.

14 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Utilitarianism concerns itself with the results or the implications. There is no clear
distinction between what is good and what is bad; the focus is on the situation and the
outcome. What may be acceptable in a certain situation can be unacceptable at some
other place. It underlines that if the net result of the decision is an increase in the
happiness of the organization, the decision is the right one.
 Debate Moral Choices - Before taking a decision, moral decisions need to be thought
upon and not just accepted blindly. It is a good idea to make hypothetical situations,
develop case studies and then engage others in brainstorming upon the same. This
throws some light into the unknown aspects and widens the horizon of understanding
and rational decision making.
 Balance Sheet Approach - In balance sheet approach, the manager writes down the pros
and cons of the decision. This helps arrive at a clear picture of things and by organizing
things in a better way.
 Engage People Up and Down the Hierarchy - One good practice is to announce ones
stand on various ethical issues loudly such that a clear message to every member of the
organization and to those who are at the greater risk of falling prey to unethical practices.
This will prevent the employees from resorting to unethical means.
 Integrating Ethical Decision Making into Strategic Management - Morality and ethical
make up for a perennial debate and ethical perfection is almost impossible. A better way
to deal with this is to integrate ethical decision making into strategic management of the
organization. The way the HR manager gains an alternate perspective rather than the
traditional employee oriented or stakeholder oriented view.

All these steps can bring better clarity into resolving ethical dilemmas. The choice lies with
the manager and the organization’s value clarity.

15 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

4.4 A framework for Good Ethical Decision-Making in Business

How do we incorporate ethics in decision making using our decision making process?
Addressing ethics in decision making in business or other large organizations or groups (e.g.,
government) does point to the need to ensure that key focusing decisions (the decisions
highlighted in green) have been made and are in place. In particular, the business decision
for core values should be in place to provide the goals/requirements that will be used to
create and constrain the criteria used in the network of business decisions. This focusing
decision can influence criteria for decisions throughout the network of business decisions
(the decisions in blue), directly influencing ethical decision making and organizational
conduct. Additional related decisions include choosing the business mission and the code of
conduct that will add compliance criteria to decisions across the business decision network.

Here are some criteria that can help ensure appropriate ethical considerations are part of
the decisions being made in the organization:
 Compliance - Does it conform to the company's values and code of ethics? Does it meet
(should exceed) legal requirements?
 Promote good and reduce harm - What solution will be good to the most people while
minimizing any possible harm?
 Responsibility - What alternative provides the most responsible response? Does the
solution ensure meeting our duties as a good corporate citizen?
 Respects and preserves rights - Does the option negatively impact an individual's or
organization's rights?
 Promotes trust - Does the solution lead to honest and open communication? Is it
truthful? Is there full disclosure?
 Builds reputation - Would a headline of your decision generate pride or shame? Does
your solution add to or detract with the identity you want for the organization?

16 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

Framework for ethical decision making: This framework for ethical decision making is a
useful method for exploring ethical dilemmas and identifying ethical courses of action. The
framework for thinking ethically is the product of dialogue & debate at the ‘Markkula Center
for Applied Ethics’ at ‘Santa Clara University’. The framework has FIVE steps & is as below:
a) Recognize an Ethical Issue
b) Get the Facts
c) Evaluate Alternative Actions
d) Make a Decision and Test It
e) Act and Reflect on the Outcome

a) Recognize an Ethical Issue:

i) Could this decision or situation be damaging to someone or to some group? Does this
decision involve a choice between a good and bad alternative, or perhaps between
two ‘goods’ or between two ‘bads’?
ii) Is this issue about more than what is legal or what is most efficient? If so, how?
b) Get the Facts
iii) What are the relevant facts of the case? What facts are not known? Can I learn more
about the situation? Do I know enough to make a decision?
iv) What individuals and groups have an important stake in the outcome? Are some
concerns more important? Why?
v) What are the options for acting? Have all the relevant persons and groups been
consulted? Have I identified creative options?
c) Evaluate Alternative Actions
vi) Evaluate the options by asking the following questions:
• Which option will produce the most good & do the least harm? (The Utilitarian
Approach)
• Which option best respects the rights of all who have a stake? (The Rights
Approach)
• Which option treats people equally or proportionately? (The Justice Approach)
• Which option best serves the community as a whole; not just some members?
(The Common Good Approach)
• Which option leads me to act as the sort of person I want to be? (The Virtue
Approach)

17 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

d) Make a Decision and Test It

vii) Considering all these approaches, which option best addresses the situation?
viii) If I told someone I respect or told a television audience which option I have chosen,
what would they say?
e) Act and Reflect on the Outcome
ix) How can my decision be implemented with the greatest care and attention to the
concerns of all stakeholders?
x) How did my decision turn out and what have I learned from this specific situation?

This framework for thinking ethically is the product of dialogue and debate at the Markkula
Center for Applied Ethics at Santa Clara University. Primary contributors include Manuel
Velasquez, Dennis Moberg, Michael J. Meyer, Thomas Shanks, Margaret R. McLean, David
DeCosse, Claire André, and Kirk O. Hanson. It was last revised in May 2009.

End of Unit. 4

EXTRA READING

18 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.

 Unit 4 – Ethical Decision Making in Business

EXTRA reading

There are five sources of ethical standards:

 Utilitarian - This one is all about balance, and this approach tries to produce the greatest
good with the least amount of harm to those involved. It deals with consequences and
practitioners who use this method are trying to find the best ethical approach for the
most people.
 Rights - Leaders who decide to go with a “rights approach” are looking to protect and
respect the rights and morals of anyone who could be impacted by ethical decisions. The
intent is for people to be treated fairly and with dignity and not as a means to an end.
 Fairness - This one touches on the fact that everyone should be treated equally regardless
of their position or influence in a company.
 Common Good - Leaders should strive to protect the well-being of those around them.
This ethical standard puts a lot of emphasis on relationships, and how compassion for the
fellow man should drive people to do good by others.
 Virtue - A virtue approach requires leaders to base ethical standards on universal
virtues such as honesty, courage, compassion, tolerance, and many others. Principles that
are chosen should cause people to strive to be their better selves and wonder if an
inappropriate action will negatively impact their inherent desire to be kind to others.

19 Compiled notes for BBA-Sem-II. Compiled by BJ Lathi, SABC, Jalgaon.