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ethics in MA by gago et.al.

  1. 1. 1 Cultural and Ethical Effects on Managerial Decisions: Examined Waymond Rodgers in a Throughput Model Susana Gago ABSTRACT. Financial and cost accounting infor- Introduction mation is processed by decision-makers guided by their particular need to support decisions. Recent Decision-makers use accounting information technological advances impacting on information to help improve their judgments and choices. as well as organizations such as the European Accounting information affects managerial Community mandating financial reporting require- decisions as well as financial reporting decisions. ments for many countries is rapidly changing the landscape for decision making using accounting Even though there has been new management information. Hence, the importance of individuals’ accounting innovations fraud is still a major threat decision making is more important than it was to businesses and statistics indicate that this previously. These decisions are also influenced by problem is growing (Turpen and Messina, 1997). individuals’ ethical beliefs. The Throughput Modeling In this information age, intellectual capital approach to cultural and ethical concerns provides a and knowledge laborers have replaced manual way of dealing with accounting information processed laborers and natural resources (e.g., wood, coal, through various pathways by decision-makers. This oil, electrical and nuclear energies) as the main modeling approach captures different philosophical source of developing competitive advantages perspectives from which to understand what is since the industrial revolution (Drucker, 1989; involved in “thinking scientifically.” In the Throughput Eisenberg, 1997). In this context the importance Modeling approach, pathways highlight the importance of individuals’ decision making is more impor- of how different philosophical perspectives may be used by individuals in arriving at a decision. This tant than it was previously. paper highlights key concepts involved in rethinking Many individuals define unethical behavior, the basis of moral decision making in terms of an as conduct that differs from what they believe underlying process, rather than focusing on the appli- would have been the appropriate decision given cation of principles or the development of a virtuous the circumstances. Each of us decides for our- character. Examples are provided from both English selves what we deem unethical behavior for and Spanish settings to help emphasize the importance others and ourselves. Within our global economy, of modeling ethical decision making globally. beliefs about what is right or wrong may vary widely across and within cultures. For example, KEY WORDS: decision making, ethical behavior, in the past some cultures believed that the world judgment and choice was flat. However, no matter how many indi- viduals believe the earth is flat, it still remains round. This paper discusses a decision making model Waymond Rodgers is Associate Professor of Graduate that capture the various stages of individuals’ School of Management, University of California, morality and ethical reasoning processes. In a Riverside. latter section, examples are provided from English Susana Gago is Associate Professor of Financial Studies and Spanish setting to help emphasize the com- and Accounting, University of Santiago de Compostela monality of ethical decision making pathways (Spain). among different cultures. Our model helps us Journal of Business Ethics 31: 355–367, 2001. © 2001 Kluwer Academic Publishers. Printed in the Netherlands.
  2. 2. 356 2 Waymond Rodgers and Susana Gagounderstand what causes individuals to act in a Building on these definitions, we providemanner that we decide are unethical. Ethical a conceptual framework called “Throughputbehavior is a prerequisite for a society to function Modeling,” which enables us to depict the variousin an orderly way (Kahn, 1990). Therefore, it can stages influenced by one’s ethical reasoning. Thebe argued that ethics is the glue that binds a importance of this model is that it imports foursociety together. The need for ethics in society major concepts (perception, information,is such an important factor that many commonly judgment and decision choice) that suggest howheld ethical values are incorporated into laws. they interact before making a decision. TheHowever, many ethical values of a society cannot significance of this model is that it illustratesbe incorporated into law due to the judgmental several different pathways and stages that cannature of certain values. For example, it is influence a decision. Basic information pro-impractical to have laws that deal with loyalty, cessing modeling normally involves serial pro-integrity and caring for others. This does not cessing. Yet, we take this approach one stepimply that these principles are less important further by assuming parallel processing. That isfor an orderly society. Ethics can then be classi- we assume that there are many (often timesfied as a set of moral principles or values. We simultaneous) pathways leading to a decision.each have such a set of values, although we may One of our main contributions is that individ-or may not have considered them explicitly. uals, depending upon their philosophical view-Philosophers, religious institutions, and others point, may weight certain pathways heavier thanhave defined in many instances ideal sets of moral others may. Decision-makers can benefit fromprinciples or values. Examples of prescribed sets understanding that other pathways may improveof moral principles or values at the implementa- or modify their decisions. Finally, this noveltion level include laws and regulations, church approach enables us to complement severaldoctrine, codes of business ethics for professional philosophical approaches with unique decision-groups such as notary publics, and a code of making paths leading to a decision. The modelconduct within distinct organizations. Quite a begins with how an individual thinks aboutfew people distinguish ethics and morality. perceived ethical dilemmas. In the context ofHowever, in this article, we adopt what other business, an ethical issue has consequences forphilosophers tend to use that is ethics as a general others inside the organization and/or externalterm referring to both moral beliefs and ethical to the organization. The intensity of an ethicaltheories (Beauchamp and Bowie, 1997). issue relates to the perceived importance of the While this study provides an overview of issue to the decision-maker (Jones, 1991). Ethicalgroup and individual decision-making processes, issue intensity, then, can be defined as the per-it does not prescribe any one philosophy or ceived relevance or importance of an ethical issueprocess as best or most ethical. Rather our goal to the individual or group. In our model, theis to understand how decision-makers’ current perceived importance of “ethical issue intensity”values and convictions are implemented in their has been found to have a strong impact onactions. One difference between an ordinary both ethical judgment and choice (Robin,decision and an ethical one lies in “the point Reidenbach and Forrest, 1996). The more likelywhere the accepted rules no longer serve, and the individuals are to perceive the importance of andecision maker is faced with the responsibility for ethical issue, the less likely they are to engage inweighting values and reaching a judgment in a questionable or unethical behavior associatedsituation which is not quite the same as any he with the issue. Therefore, ethical issue intensityor she has faced before. The other difference should be considered a key factor in the ethicalrelates to the degree of emphasis placed on a decision process as depicted by “perception” indecision-maker’s values when a process occurs on the Throughput Model.route to a decision. Hence, values, perceptions Figure 1 illustrates how the process of an indi-and judgments play a critical role rendering vidual’s decision choice is made. If perceivedethical decisions (Trevino, 1986). relevance is an important determinant of how
  3. 3. 3 Cultural and Ethical Effects on Managerial Decisions 357 information is processed or retrieved from memory and acted upon by decision rules as practiced or used in one’s profession (e.g., loan officers, auditors, medical doctors, lawyers etc.). These decision rules are encoded in the judgment stage in the model. These rules provide guidance in sorting, arranging, ranking and rating infor- mation before a decision choice or action is taken. Finally, the relationship I → J does not imply Figure 1. Individuals’ decision processes diagram an incorrect learning or memorization of the where P = perception, I = information, J = individual. However, P → I → J or I → P → judgment, and D = decision choice. J could lead to a bias judgment. Of course time pressures, uncertain information, unstable envi- ronment and the expertise of the decision-maker an individual represents a problem and uses contribute to whether or how many biases can the information, it is necessary to know what distort the judgment stage. determines the perception of relevance in the Since information typically is processed sub- Throughput Model. The proposed specific relations jectively by decision-makers, it is interdependent will be explored and developed further in a series with perception in the conceptual model (Alloy of processes for future research. and Tabachnik, 1984; Anderson, 1985). The First, perception is the framing of our situational information and the decision-maker’s environment and how we view information. prior expectations or beliefs about the informa- Perception discussed in this paper is of a higher tion are relevant to perceiving the degree of mental activity level that involves categorization covariation between them. Both of these infor- and classification of management information. mation sources jointly determine covariation per- Lower levels of perception include how people ception (Alloy and Tabachnik, 1984). Ignoring pick up or process information through their covariation perception may lead to conceptual senses, such as vision, touch, hearing, etc. The difficulties in understanding and interpreting lower level of perception normally involves auto- results (Phelps and Shanteau, 1978). Einhorn et matic (and sometimes unconscious) reactions or al. (1979) advocated that the execution of an responses to stimuli (information). An example individual’s decision choice may be made would be a person experiencing an increase cir- ambiguous and difficult due to redundancy of culation of blood due to a charging lion. cues (i.e., prior expectation and presented finan- Since we are examining a much more devel- cial statement information). In particular, the fact oped cognitive state of mind, perception is often that cues are related not only to perceptions but termed as classifying and categorizing of events to each other, as well, means that the role of or information. Since individuals have different interdependency of perception and information ways of viewing (classifying and categorizing) should be considered in a model. For example, places, people and things, certain biases and Anderson (1974, p. 236) argued that individuals’ heuristics generally occur in the processing of perceptions result from an integration of diverse information. pieces of information. The interdependency and In relationship to I → P, information influ- redundancy of perceptual effects and presented ences and reshapes an individual’s perception. information have important effects on the kinds This reshaped perceptual frame provides an indi- of judgment and decision choice strategies indi- vidual with a modified or new perspective in viduals use (Ebbesen and Konecni, 1975). Finally, problem solving or decision making. by illustrating a correlation between information I → J infers no inference from a person per- cues and perception, the Throughput Model is con- ception. That is, in a problem solving task, the sistent with the Lens Model as modified by
  4. 4. 358 4 Waymond Rodgers and Susana GagoHammond (e.g., Hammond, McClelland and priate to answer questions about a particular partMumpower, 1980; Abelson and Levi, 1985). of reality are all influenced by what we hold as In the Throughput Model, information (circle valuable.1 in Figure 1) also affects judgment. Forexample, information stored in memory affectsdecision makers’ evaluations of framed prospects. Throughput Model’s pathwaysTypically, before an individual can make adecision, that individual encodes the information The decision-making processes of individuals canand develops a representation for the problem be represented in an organized manner. In order(Johnson-Laird, 1981). Finally, perception and to study the methods of these decision processesjudgment can affect decision choice. Some it is important to break up all the paths markedauthors, notably Kahneman and Tversky [1982], with arrows in Figure 1 into sets of individualhave suggested that both automatic, perception- pathways. These fragments can then be inde-like heuristics and more deliberate information pendently analyzed for their contributing prop-processing strategies (judgment) are involved erties to individuals’ decision processes (Rodgers,in most decision choices. Errors, biases, and 1997). Further, it is common for decision-makerscontext-dependent heuristics may result from to differ in their moral philosophical values. Evencognitive mechanisms of which decision makers if two individuals agree on the ethical principlesare largely unaware, and these may have a direct that determine ethical behavior, it is unlikely thatimpact on decision choice (Rodgers, 1992). The they will agree on the relative importance of eachstrategies of judgment that influence decision principle. These differences are highlighted inchoice are under an individual’s deliberate Figure 1, depicting several pathways towardcontrol. making a decision. Throughput modeling begins with individuals Based on Figure 1, we can establish six generalstating their philosophical views of what should pathways:be done. The advantage of this approach is thatit helps decision-makers understand why indi- (1) P → Dviduals have selected some information, which (2) P → J → Dsupports their position, and have ignored other (3) I → P → Dinformation, which does not support their (4) I → J → Dposition. This approach helps uncover the obser- (5) P → I → J → Dvations and values on which individuals rely upon (6) I → P → J → Dwhen taking positions on issues. Also, the model There are many philosophies, which areis useful in depicting latter stages of processes, complex in nature. We discuss six prominentsuch as judgment, that are implemented in sup- approaches depicted in the Throughput Model sixporting individuals’ positions. general pathways. The six philosophies discussed Throughput Modeling helps us clarify and below are psychological egoism, deontology,evaluate decision-makers’ responses to contro- relativist, utilitarianism, virtue ethics, and ethicsversial issues. Controversial issues are matters on of care.which individuals have different philosophicalviews of what is right. Controversial issues also (1) P → D represents psychological egoisminvolve conflicts between different views of what that stresses individuals are always moti-is right. Throughput Modeling depicts the most vated to act in their perceived self-influential pathways employed in arriving at a interest.decision. That is, what we hold as valuable enters (2) P → J → D depicts the deontology view-into our perception of the information. Our judg- point that emphasizes the rights of indi-ments about what the information is, what is viduals and on the judgments associatedacceptable as information, what evidence we will with a particular decision process ratherbelieve, and what philosophical theory is appro- than on its choices.
  5. 5. 5 Cultural and Ethical Effects on Managerial Decisions 359 (3) I → P → D highlights the relativist per- A positive sign will imply strong coherence while spective which assumes that decision- a negative sign will imply a weak one, respec- makers use themselves or the people tively. In order to give direction to a necessary around them as their basis for defining pattern, we will assume that any correlation coef- ethical standards. ficient that is larger than or equal to 0.5, in (4) I → J → D reflects the utilitarian position absolute value, will be considered supportive of which is concerned with consequences, as a high coherence and thus will receive a positive well as the greatest good for the greatest sign, while any correlation coefficient that is number of people. smaller than 0.5, in absolute value, will receive (5) P → I → J → D under scores the a negative sign and will imply a weak coherence virtue ethics outlook which is the classical of the variables associated with that path. Each Hellenistic tradition represented by Plato path can have a positive (+), negative (–), or zero and Aristotle, whereby the cultivation of (0) flow going through it that can be represented virtuous traits of character is viewed as numerically with the data collected by Rodgers’ morality’s primary function. original survey with actual loan officers. The sign (6) I → P → J → D represents the ethics of the flow is dependent upon the relative impor- of care philosophy which focuses on a set tance of the use of that pathway for reaching a of character traits that are deeply valued decision. in close personal relationships, such In Figure 2 through Figure 7 the missing as sympathy, compassion, fidelity, love, pathways are either (–) or (0). In other words, friendship, and the like. all the paths drawn are the pathways with large absolute value correlation coefficients, thus they are the ones influencing individuals’ decisionSix dominant throughput modeling pathways choices the most. Since this analysis is not just a theoretical exercise, we need only find theThese six pathways are viewed as the most combinations that make sense for our specificdominant and influential for decision making application, i.e., a decision must be made by ourdominated by particular moral perspectives. decision makers. Therefore, all zero pathwayAlthough, it is important to note that other combinations can be disregarded when they leadpathways in the Throughput Model also contributes to no decision. Hence, all the pathways drawnto the above philosophical positions. Our represent logically possible pathways that yieldargument is that the corresponding pathway to decisions. Even with this reduction in numbereach particular philosophical view is the most of combinations, it is clear: decision makers’dominant. processes can involve a series of complicated Rodgers (1992, 1997) performed a covariance steps. These six pathways are viewed as the moststructural analysis with unobservable variables,based on a survey of loan officers’ and novices’decision processes in order to derive covarianceamong perception, information, judgment, anddecision. The results of his calculation from hissurvey, the coefficients, represent the coherencebetween the analyzed variables. A coefficient, r,is a number such that: –1 ≤ r ≤ +1. Even though we are not interested in theactual real values of these correlation coefficientsor in their respective signs, we are interested intheir approximate sizes. That is, we will usenegative and positive signs to represent the depth Figure 2. P → D Decision is made based onof coherence of the variables on a particular path. perception only.
  6. 6. 360 6 Waymond Rodgers and Susana Gagodominant and influential for decision making Therefore, the decision about paying taxes (D)dominated by particular moral perspectives. was influenced by the perception of the indi- In statement (1) P → D implies that all vidual about his self-interest (to avoid to be aninformation from I is disregarded and decision object of an inspection – perception).is made without any judgment. Lipshitz and Llorens (1996) analyzed for the clients of cafe-Strauss (1997) advocated that there are three basic terias and restaurants the relationships amongissues surrounding downplaying data sources, client satisfaction (J), the perception of qualitynamely those reflecting incomplete information, (P) and future intention of repeating the serviceinadequate understanding, and undifferentiated provided (D). The clients were habitual clients.alternatives. These basic issues may downplay an He found that (1) the perception of quality influ-individual’s use of information during the first enced the future intention of buying (P → D),stage of processing. and (2) that the perception of quality influenced P → D represents psychological egoism, which the satisfaction of the client (P → J). Since theindicates that individuals are always motivated to relationship of (1) was stronger than (2), the asso-act in their perceived self-interest. This theory ciation of P → J → D was not established.is a subset of the Teleological theories of ethics, In Figure 3, P → J → D depicts the deontologysometimes called consequentialist theories. These viewpoint that emphasizes the rights of individ-theories hold that the moral worth of an action uals. This viewpoint examines the judgmentalor practice is determined solely by the conse- effects on decision choices. A basic premise toquences of the action or practice. Figure 2 this viewpoint is that equal respect must be givenassumes that the decision-maker’s choice is driven to all individuals. Therefore, the judgment stageby his or her predisposition or framing of the implement decision rules that help guide indi-problem. In other words, the psychological viduals to a decision. Apart from egotists andegoism perspective relies heavily upon one’s utilitarians, deontologists advocate that there arepreconceived notions of framing the problem. certain things that we should not engage in, evenDue to the above three basic issues (i.e., incom- to maximize utility. Deontologists also regard theplete information, inadequate understanding and nature of moral principles as permanent andundifferentiated alternatives), information may stable, and that compliance with these principlesbe very limited or unreliable in contributing to defines ethicalness. Further, they believe thata decision. Also, time pressures may prevent a individuals have certain absolute rights, whichthorough analysis via the judgment stage. For include (1) freedom of conscience, (2) freedomexample, Housel and Rodgers (1994) reported of consent, (3) freedom of privacy, (4) freedomthat high-analytic loan officers were more likely of speech, and (5) due process.to go directly from their perception of the loan Statement (2) P → J → D implies that infor-data to decision choice than low-analytic loan mation from I is disregarded, as above, and aofficers (when the effect of experience levelbiases are accounted for). The authors reasonedthat high-analytic loan officers’ abilities allowthem to perform more precise analysis of the loandata. That is, they are better able to disembed themeaningful information from the less meaningful.The low-analytic types are more likely to aggre-gate data into larger chunks, thus not permit-ting a finely tuned analysis and more oftenrequiring the additional analysis of the judgmentstage. In a study by Prieto (1995), the greater fearof an audit inspection as compared to a civic Figure 3. P → J → D The decision path is:duty led to the elimination of the fiscal fraud. Perception to Judgment to Decision.
  7. 7. 7 Cultural and Ethical Effects on Managerial Decisions 361decision is reached via judgment. There are at practically null effect on men). The decisionleast several reasons for this occurrence. First, to leave employment (D) was based on theirinformation may be disregarded due to its judgment (J) that marriage, maternity and edu-unreliability. For example, a pre-medical student cation of the children (P) were not compatibledepiction of a patient illness would not carry the with the work. A major indication of this con-same weight as an experienced medical doctor. clusion rests with the fact that most women thatAnother reason for ignoring information may left employment for these reasons did not returnresult from noise interfering with the main signal to work.or message. In this particular scenario, the In the Spanish administration the system todecision maker may be confused regarding the contract a person as a public person shouldintended message of the information. Finally, follow some steps which tried to guarantee thatconflicting informational signals may obfuscate the access would be free, under equal conditionsa decision-maker from determining the proper and without any kind of discrimination amongweights to place on the information sources. citizens caused by whatever reason (constitutional For example, to contract a person, a company principles). Hence, the decision-making activityor to give a subsidy in the Spanish public system related with contracting a person as a publicrequires a public offer, which avoids whatever person would be quite dominant in this pathway.possible kind of discrimination among citizens In Figure 3, an individual forms a perceptioncaused by whatever reason. During the final without the use of any information, weighs thecampaign election days some politicians were possible outcomes before making any judgmentaccused to be involved in illicit situations with and then concludes with a decision. Culbertsonmembers of their families or friends by the press. and Rodgers (1997), for example, demonstratedThis pressure caused a particular politician to that perceptions influence the interpretation ofrenounce his candidacy, even though he was inappropriate sexual behavior (judgments). Inattacked without valid reasons. Evidently the other words, perceptions regarding the organi-press accused the politician (D) based on their zation’s climate toward sexual harassment influ-perceptions regarding friendship involvement enced individuals’ decisions regarding satisfactionwith certain people (P), judging that he was at with the organization, whether they wouldfault (J). recommend the organization to others, and De Elizagarate et al. (1996) were interested in their intention to stay with the organization.why some people purchased merchandise in the Throughput Modeling may assist us in under-South of France (Aquitania) instead of Spain (Pais standing the important factors that can guide andVasco, Guipuzcoa) (D). The economic reasons increase our awareness of improving managerialwere not considered as they found that although effectiveness in the workplace.most of the interviewees thought that the deval- I → P → D highlights the relativist perspectiveuation of the peseta affected them, the majority which assumes that decision-makers use them-pointed out that they might not buy less than selves or the people around them as their basisbefore. Motivations for buying were based upon for defining ethical standards. They observe thetheir perceptions of the big shops (which did not actions of members of some relevant group andexist in Spain) (P) and the consideration that attempt to determine the group consensus on athey provided an interesting combination of given behavior. Relativism recognizes that people“leisure and interesting shopping” (J). Hence, the live in a society in which they have varied viewspathway appears to be governed by the following and positions from which to justify decisions aspathway: P → J → D. right or wrong. Therefore, ethical relativists Hernández (1997) studied the reasons and maintain that all ethical beliefs and values areconsequences of voluntary renouncing of women relative to one’s own culture, feelings, or religion.to work. He found that marriage, maternity and That is, individuals’ knowledge structures areeducation of children were reasons for them to influenced by their education, religion, booksleave work (nevertheless, these reasons had a they reads, and their environmental setting. What
  8. 8. 362 8 Waymond Rodgers and Susana Gagoone person accepts could be rejected by another Navy’s policy makers have believed that Navyone, in both cases being not rejected by the social morale, welfare, and recreation programs doesgroup. contribute to performance. The use of this model A recent study concerning Galician Business demonstrated that fitness use does impact onDirectors (Gago et al., 1997a, 1997b), reported one’s intentions to remain in the Navy. Thethat their strategies in decision-making (D) were modeling approach demonstrates how complexmainly negotiation and political agreement. The relationships between morale, welfare, and recre-informal information was considered very prim- ation programs and important outcomes variablesitive in aiding their decisions. The directors men- can be combined into a single model that cantioned, amongst other things, telephone calls, assist Navy leaders help when facing hard fundingconversations and casual meetings, and pointed choices regarding quality of life programs forout their interest in providing information for Navy personnel.day to day activities and the renovation of oper- I → J → D pathway reflects the utilitarianative functions. The fellowship between members position, which is similar to psychological egoism inof business schools permits easier exchange of that it is concerned with consequences, as wellinformation. Their perception of informal infor- as the greatest good for the greatest number ofmation (P) was what they implemented for people. Utilitarianism is generally traced todecision choice (D). Jeremy Bentham (1748–1832) who sought an Díaz de Rada (1996) studied people who pur- objective basis for making value judgments thatchased clothes and shoes during discount periods would provide a common and publicly accept-(D). The purpose of this study analyzed how able norm for determining social policy andmany people purchasing behavior was motivated social legislation (Velasquez, 1998). This positionby locating a bargain without considering the is committed to the maximization of the goodutility of the product (J). Further, it was found and the minimization of harm and evil. Further,that 49.1% of people perceives the bargain (P) this theory advocates that society should alwaysbased on the information about the discount (I) produce the greatest possible balance of positiveand decided to buy (D). value or the minimum balance of negative In Figure 4, a decision maker reads the infor- value for all individuals affected. Therefore, themation presented and without any consideration utilitarian principle infers that quantities ofof the alternatives makes a decision based on the benefits produced by an action can be measuredperception he or she formulated from the infor- and added and the quantities of harm can bemation presented earlier. In a study conducted measured and subtracted. This will determineby Rodgers, Culbertson, Olmsted and Thomas which action produces the greatest total benefits(1998), enlisted navy personnel’s maturity and sex or the lowest total costs.influenced their perception of fitness use, which Figure 5, for example could represent ain turn influenced their quality judgments. ManyFigure 4. I → P → D The decision process goes Figure 5. I → J → D Decision path: Informationfrom Information to Perception and to Decision. to Judgment to Decision.
  9. 9. 9 Cultural and Ethical Effects on Managerial Decisions 363manager whose decisions evolve around a struc- viewed as morality’s primary function. Aristotletured environment offering very little change. argued that virtuous character is cultivated andFor example, a cost accountant determining the is part of an individual, similar to language ortotal costs of a company manufactured product, tradition. The virtue ethics outlook not onlymay select this pathway if the costs involved are assumes a disposition to act fairly but also afixed due to contractual relationships with his morally appropriate desire to do so. Figure 6suppliers. The manager’s judgment regarding implies that an individual’s perceptions or framingfuture costing of the product will probably be of the problem will influence the selection andbased upon the past supplier cost sheets (Rodgers type of information to be employed in judgment.and Thomas, 1998). That is, an individual is motivated to act appro- In this approach the “egoist” concern about priately (perception), which influences the infor-consequences is supported by an utility function mation set (I) used to be analyzed (judgment)which allows individuals to establish a judgment before a decision is made. This perspectivebased on the benefits and cost of their decisions. suggests that a morally bound individual withTo collect information about the consequences good motivations is more likely to understandis necessary in this approach. what task should be performed more so than a Gago (1999) concluded in a decision making morally bad individual. In other words, trust isstudy that profits were the primary factors the moral cement of the business community.involving ecological innovations in Galicia (D). Beauchamp and Bowie (1997, p. 39) advocatedThat is, most Companies’ Directors felt that that “A person who simply follows rules of oblig-the main interest for introducing co-operation ation and who otherwise exhibits no specialwith environmental concerns (J) involved the moral character may not be trustworthy.”economic interest (mainly cost savings) (I) of A point of clarification regarding the interde-the company. Only one Director felt that the pendence between perception and judgment iscompany actions were guided mainly by ecolog- that the pathway shown as P → I is a contin-ical concerns (reducing waste products). uous forward and backward path (see Figure 1). Huerta and Sánchez (1998) analyzed the Also, this pathway suggests that perceptionreasons for introducing Information Technology dominate information. Thus, when the pathin four Spanish companies’ (D). They argued that direction is P → I, we suggest that P dominatesin two companies the judgment about the con- I in an individual’s actions toward reaching avenience of introducing Information Technology decision. When the direction of the arrow is(J) was based on financial aspects (I). And in one reversed: P ← I implies that I dominates P andcompany, judgment was based on costs and effi- an individual’s primary method of decisionciency (I) and in another company on strategic making is via information (Rodgers, 1997).aspect (I). In the P → I → J → D pathway, Rodgers Sánchez and Gil (1997) studied the structure (1997) argued that auditors’ perceptions domi-of preferences about red wine pertaining to“denominación de origen” (which is similar toa government guarantee for the quality and theorigin of the wine). They found that preferencesabout the wine (D) were influenced in a non-significant way by the price, the origin of thewine (I), and the kind of wine (I). These werethe critical attributes contributing to judgment(J). P → I → J → D under scores the virtue ethicsoutlook which is the classical Hellenistic traditionrepresented by Plato and Aristotle, whereby the Figure 6. P → I → J → D Perception tocultivation of virtuous traits of character is Information to Judgment to Decision.
  10. 10. 364 10 Waymond Rodgers and Susana Gagonate the information that would be used to con- budget of 750.000.000 pesetas (about 4.500.000struct a judgment to decide on. The individual’s euros) (D).perception will determine the information that I → P → J → D represents the ethics of carehe will consider at the time of forming a philosophy which focuses on a set of characterjudgment. Such judgment will determine the traits that are deeply valued in close personaldecision-making. The “utilitarims” will be relationships, such as sympathy, compassion,dominated by the perception in the sense that fidelity, love, friendship, and the like. Figure 7will be the perception that determines the rules represents the last possible fragmented way forof the play. individuals’ cognitive processes. In this sequence, Blanco and Gago (1993) discussed students’ an individual studies the given information,perceptions pertaining to the need of introducing frames the problem, and then proceeds to analyzean ethic subject on accounting in the curriculum. the problem before rendering a decision.Most students (82,7%) considered that the system Information helps guides an individual’s percep-of values provided by the family (P) could be tual perspective. That is, the ethics of care phi-reoriented or continued by an adequate educa- losophy incorporates a willingness to listen totion (I). In addition, only 28,2% of the students distinct and previously ignored or unaccustomeddefended that the educational system promoted viewpoints.ethical lines of behavior. Finally, 81,2% of the In the I → P → J → D pathway, informa-students defended the necessity of an ethics tion dominates the perception in an “open-subject in accounting as a way to influence the minded” individual. The judgments used toway in which decision-making is developed decide on will be the result of the perceptions(J), resulting in perhaps more ethical decisions that the individual produced as a result of the(D). information. The “altruism” is modeled in this Canay and Gago (1999) studied the strategic model by the information available to decideplan for Information Technology (i.e., internet, on.intranet and centralized telephone service) in the Rodgers (1999) found that managers receivedUniversity of Santiago de Compostela. During valuable information (I) from internal auditors’Rector Pajares’ term of office in 1987, a recommendations. Bank managers’ often timespreliminary strategic plan was developed for formed personal relations with their customers.Information Technology. This plan was based on the The internal auditors’ recommendations wereadvantages that Information Technology could instrumental in help guiding managers’ assess-provide for the scientific community (P). After ments of expenses. This information influencedthe successful development of a single switch- managers’ perceptions (P) regarding controllingboard for the whole Southern Campus (P), the their expenses. Their perception (P), includedRector approved a preliminary survey for exam- non-financial information related to customers’ining the viability of providing the Universitywith a more effective communications service toan external consultancy (I). Even though thisproject was never executed, the decision on theStrategic Plan (D) was made during the RectorVillares’ term of office in 1990. That is, fromother sources he approved the contracting of anexternal-consulting agency to make an invest-ment plan (I). This process involved theUniversity’s information technology experts, asconsultants they aided in its development. Oncetechnical and economic viability had been con-firmed (J), the strategic plan was adopted for the Figure 7. I → P → J → D Information toacademic year 1992/1993 and provided with a Perception to Judgment to Decision.
  11. 11. 11 Cultural and Ethical Effects on Managerial Decisions 365satisfaction, influenced their judgment (J) before efficient and profitable procedures and outcomes.a decision (D) was made. Global business is continually bringing people Blanco and Gago (1993) asked students about and countries together that have differenthow they could regulate the ethical conduct of cultures, values, and ethical standards. Com-the accountant. 39,1% pointed out rules, 39,1% munication and information flow may bepointed out recommendations, 10% both and improved by the development of a model that2,7% no regulation. The students made recom- captures and integrates decision-making processesmendations (I), argued that (a) ethics could not along with ethical reasoning.and should have not been imposed on accoun- Psychological egoism, deontology, relativist,tants, (b) the need for society and the individual utilitarianism, virtue ethics, and ethics ofto be conscious about the behavior ethical reper- care represent six prominent philosophies ofcussions, and (c) individuals have the responsi- ethics. Understanding these six prominent ethicalbility to act in an ethical way. These assertions philosophies may aid in financial and managerialassume that accountants’ judgments (J) were decisions across cultures. These philosophicalbased on their perceptions of what is ethical (P), positions were embedded in a decision-makingas well as what can be influenced by informa- paradigm called the Throughput Model.tion via recommendations (I). The Throughput Model described in this paper Rodríguez (1998) studied the informational may help assist decision-makers in their finan-variables that exerted an influence over the cial and managerial tasks. This approach is onedecision of eliminating a product. She affirmed way to relate major ethical philosophies in onethat companies observed the same variables model. However, decision making modelingrelated to the profitability of the product (I), approach emphasizing ethical philosophies iswhich allows the company to detect the per- strengthen by considering the following:ceived weakness of the product (P). The (1) an analysis of decision makers’ framing ofcompany then evaluated whether to eliminate the information (i.e., perception);certain products based upon its weaknesses (e.g., (2) an analysis of the framing effects have onexistence of a substitute product, pressure from their judgments;external groups, profitability of alternative (3) the decisions that decision makers make;products, etc.), before arriving at a decision (D). andIn relation to the periodic supervision of the (4) feedback designed to help decision makersproducts (or the influence of the weakness detec- understand the effects of their accountingtion and the detailed evaluation), she demon- information processing on their decisions.strated that there exist a positive correlationamong the existence of a periodic supervision Future research can test and validate decisionand the number of products eliminated. makers’ processes with the Throughput Model. Assisting individuals to make improve moral deci- sions is one of the most important componentsConclusions of any decision making model incorporating ethical processes. The approach suggested hereTolerance and respect for cultural diversity is an may help solve ethical dilemmas, and therebyongoing challenge in the international business improve the overall decision-making processes ofcommunity. We believe a framework addressing individuals. This research article moves toward amajor ethical positions can help guide decision vision of business ethics research that will helpmaking on not only a domestic level but also on move the field through its current developmentalan international level. A model that can highlight stage.the various pathways in which ethical reasoningcan affect a decision may be helpful for ourfuture decisions. Understanding individuals’ethical reasoning processes may lead to more
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