Ethical leadership and decision making factors

2.  Today’s rapid changing environment poses ethical
challenges for executives
 Executives have to ensure that a decision taken today
should not back fire in the future
 People divide the world into “us” and “them” that leads to
discrimination.

3. Discussing the various theories used by executive to
make crucial decisions. Namely
Theories about the World,
Theories about Other People
Theories about Ourselves
What is the scope of the topic?
How aspects of the
above theory may be
incorrect
Identify areas where
errors may rise
Suggesting remedies
on how executives can
improve their ethical
decision making

4. Consideration of
Consequences
Judgment of Risk Perception Of
Causes
Theories of the World
Theories
of world
Theories
of other
people
Theories
of self

5.  Ignoring Low Probability events: Considering what is
important and ignoring the rest
 Limiting the search of Stake Holders: Companies
must consider harmful effects as well
 People are not important : Ignoring the possibility that
people will find out
 Discounting the future: Considering short term gains
only
 Undervaluing Collective Outcomes: Engineering
failure with corporate negligence
Theories
of world
Theories
of other
people
Theories
of self

6.  Denying Uncertainty: People think the world is not
uncertain, and come up with their own theories
◦ Experience may not always be a good teacher
◦ “I should have known” means predictability
 Eg: Cigarette and its hazards, standard proof is needed
 Risk Trade-Offs:
◦ What are the factors that the company is ready to let go and take
risk?
◦ What level of risk is acceptable?
 Risk Framing:
Theories of
world
Theories of
other people
Theories of
self
Plan Total 3 plants, 6000 employees
Plan A Save 1 of 3 plants, save 2000 jobs
Plan B One third probability of saving all 3 plants and all 6000 jobs
Plan C Loss of 2 of 3 plants and 4000 jobs
Plan D Two thirds probability of losing all 3 plants & 6000 employees

7.  Focus on People
 Different Events
 Sins of Omission
Theories
of world
Theories
of other
people
Theories
of self

8.  Focus on People
 Our theories about the world consider people as the
“causal agents” for things gone wrong rather than the
external environmental factors.
 Different Events
 Changes in the organization often lead to unethical
conduct.
 Sins of Omission
 Failure to take an action by an ethical person against an
unethical conduct by the other person or group.
Theories
of world
Theories
of other
people
Theories
of self

9. Theories
of world
Theories
of other
people
Theories
of self
Increasing social diversity
of the business world
Makes executives prone to
incorrect theories about
certain social groups
Culminates into ethically
incorrect decisions

10.  Characteristics of one’s own nation, group or
culture appears to be normal
 Characteristics of others appear foreign, strange
and curious
 Our values and beliefs become the standard
against which to judge rest of the world

11. An individual with an ethnocentric view:
 Identifies strongly with in-group ethnicity,
culture, etc.
Views economic, political, social events from
the point of their in-group
Defines their culture elements as ‘correct’ &
‘natural’
Xenophobia: a fear or hatred of persons of a
different race, ethnic or national origin
Defines other culture’s elements as ‘incorrect’
& ‘unnatural’

12. Stereotypes
 Generalizations about a group of people whereby
we attribute a defined set of characteristics to this
group: either positive or negative
Why do stereotypes occur?
 Stereotypes arise as a way of explaining or
justifying differences between groups
 Lack of exposure to other groups, cultures, beliefs
etc.
Theories
of world
Theories
of other
people
Theories
of self

13. Illusion of
Superiority
Self-Serving
fairness Biases
Overconfidence
Illusion of
Favorability
Illusion of
Control
Illusion of
Optimism
Theories about
Ourselves
Theories
of world
Theories
of other
people
Theories
of self

14.  Illusion of Superiority: People often think of themselves of being
better than others.
 Illusion of Favorability
 Illusion of Control
 Illusion of Optimism
 Self-Serving fairness Biases: An executive may often see himself
as putting in a lot of effort and may believe that he deserves much more
than what he is already getting but often in such cases other colleagues
may do not share the same view. The same executive when judging others
would only see the results got by others and not the effort put in by them.
 Overconfidence: This trait is mostly seen in successful executives
where their experience may force them to believe they know more then
enough and this may lead to reluctancy to learn knew things.
Theories
of world
Theories
of other
people
Theories
of self

15.  Quality
 Breadth
 Honesty
Inaccuracy in understanding theories of the world, of other people
and ourselves is the root cause of poor decision making skills.
We can outline three broad criteria that must be looked at for
improving ethical decision making as follows