Lecture 6

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Chapter 5
Ethical Decision
Making
Part Three
The Decision
Making Process

2. A Framework for Ethical Decision
Making in Business
 In business, people make decisions differently
than at home
 Organizational pressures have a strong influence
 The ethical decision making process includes
 Ethical issue intensity
 Individual factors
 Organizational factors
 The framework for ethical decision making does
not describe how to make ethical decisions
 Outlines the factors and processes related to ethical
decision making
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3. A Framework for Ethical
Decision Making in Business
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4. Ethical-Issue Intensity
 The perceived relevance or importance
of an ethical issue to the individual,
work group, and/or organization
 Reflects the ethical sensitivity of the
individual and/or work group
 Triggers the ethical decision making process
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5. Ethical-Issue Intensity
 Individuals are subject to six spheres of
influence…
 Workplace Legal system
 Family Community
 Religion Profession
 Moral intensity: Relates to a person’s
perception of social pressure and the harm
his/her decision will have on others
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6. Individual Factors
 People base their ethical decisions on their
own values and principles of right or wrong
 Values are learned through socialization
 Good personal values decrease unethical
behavior and increase positive work behavior
 Values are subjective; vary across cultures
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7. Individual Factors
 An organization may intend to do right, but
organizational or social forces can alter this
intent
 Research shows that various factors
influence ethical behavior
 Gender—women are more ethical than men
 Education, work experience, nationality, and age
affect ethical decision making
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8. Locus of Control
 Relates to individual differences in
relation to a general belief about how
one is affected by internal versus
external events or reinforcements
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9. Locus of Control
 Managers with…
 External locus of control go with the flow
because that’s all they can do
 Internal locus of control believe they can
control events; are masters of their destinies and
trust in their capacity to influence their
environment
 Unclear relationship between locus of
control and ethical decision making
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10. Organizational Factors
 Organizational culture has a stronger
influence on employees than individual
values
 Corporate culture: A set of values, norms,
and artifacts that members of an
organization share
 Ethical culture: Reflects whether the firm has
an ethical conscience; is a function of many
factors
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11. Organizational Factors
 Significant others: Those who have
influence in a work group
 Obedience to authority: Helps to explain
why many employees unquestioningly
follow superior’s orders
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12. Opportunity
 The conditions in an organization that
limit/permit ethical/unethical behavior
 Immediate job context: Where employees
work, with whom they work, and the nature
of the work
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13. Opportunity
 Opportunities for misconduct can be
reduced by establishing formal codes,
policies, and rules
 Aggressive enforcement is required
 Knowledge can sometimes lead to unethical
behavior
 A person who has an information base, expertise,
or information about competition has an
opportunity to exploit knowledge
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14. Most Common Office Supplies
Stolen by Employees
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Source: “Top Office Supplies that Are Stolen
and the Average Value of Contents In A
Woman’s Purse!”
KMLE, May 16, 2012,
http://kmle1079.cbslocal.com/2012/05/16/top-
office-supplies-that-are-stolen/
(accessed April 12, 2013).
1. Post-It notes
2. Tape
3. Scissors
4. Toilet paper
5. Copier paper
6. USB memory sticks
7. Notepads
8. Pens
9. Staplers
10. Highlighters

15. Business Ethics Intentions,
Behaviors, and Evaluations
 Ethical dilemmas involve situations
where rules are vague or in conflict
 Critical thinking skills and ability to take
responsibility are important
 The final step is deciding what action to take
based on a person’s intentions
 Guilt or uneasiness is the first sign that an
unethical decision has occurred
 Most businesspeople will make ethical
mistakes
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16. Using the Ethical Decision-Making
Model to Improve Ethical Decisions
 Impossible to objectively determine if a
business decision is right or wrong
 Understanding how ethical decisions are made
will not solve ethical problems
 Business ethics involves value judgments and
collective agreement about acceptable patterns of
behavior
 Ethical decision making in business does not
rely on personal values and morals
 Organizations take on cultures of their own
 Informal relationships enforce an ethical culture
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17. Normative Considerations
in Ethical Decision Making
 Normative approaches: How
organizational decision makers should
approach an issue
 Different from a descriptive approach that
examines how organizational decision makers
approach ethical decision making
 Concepts like fairness and justice are highly
important in a normative structure
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18. Normative Considerations
in Ethical Decision Making
 Most organizations develop a set of core
values to provide enduring beliefs about
appropriate conduct
 Core values are central to an organization and
provide direction for action
 By incorporating stakeholder objectives into
corporate core values, companies begin to
view stakeholders as significant
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19. Institutions as the Foundation
for Normative Values
 Institutions are important in establishing a
foundation for normative values
 Organizations face certain normative
pressures from different institutions to act a
certain way
 Internally and/or externally
 Sort institutions into three categories: Political,
economic, and social
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20. Institutions as the Foundation
for Normative Values
 Political influences can take place within the
organization
 An ethical organization has policies and
rules in place to determine appropriate
behavior
 Often the compliance component of the
firm’s organizational culture
 Failure to abide by these rules results in
disciplinary action
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21. Institutions as the Foundation
for Normative Values
 Normative business ethics takes into
account the political realities outside the
legal realm in the form of industry standards
 Legal issues such as price fixing, antitrust
issues, and consumer protection are
important in maintaining a fair and
equitable marketplace
 These issues must be major considerations for
business when making ethical decisions
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

22. Institutions as the Foundation
for Normative Values
 Competition affects how a company operates as well
as the risks employees take for the good of the firm
 Amount of competition in an industry can be
determined/described according to…
 Barriers to entry into the industry
 Available substitutes for the products produced by the
industry rivals
 Power of the industry rivals over their customers
 Power of the industry rivals’ suppliers over the industry
rivals
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23. Institutions as the Foundation
for Normative Values
 Social institutions include religion, education, and
individuals such as the family unit
 There are laws meant to ensure an organization acts
fairly, but there are no laws saying people should do
to others as they would prefer to have done to them
 Many cultures adopt this rule that has been
institutionalized into businesses with standards on
competing fairly, being transparent with consumers, and
treating employees with respect
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24. Institutions as the Foundation
for Normative Values
 Industry shared values promote organizational
effectiveness when linked to goals
 Can also hinder effectiveness if more efficient
means of organization and structure are avoided in
exchange for stability
 Risk that organizations might sacrifice new ideas or
methodologies in order to be more acceptable
 Can limit innovativeness and productivity
 Important that organization does not stray too far
from industry norms and values
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25. Institutions as the Foundation
for Normative Values
 When values from political, economic, and
social institutions are embedded into the
organizational culture to provide incentives
for appropriate behavior, firms tend to act
more socially responsible
 If incentives do not align with institutional
normative values or if they contradict these
values, then misconduct is likely
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25

26. Implementing Principles and Core
Values in Ethical Decision Making
 John Rawls was one of the most influential
philosophers in his research on how
principles support the concept of justice
 Veil of ignorance: A thought experiment
that examined how individuals would
formulate principles if they did not know
what their future position in society would
be
 Identified principles that were not biased by
one’s social position
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27.  Two main principles of justice…
 Liberty principle (equality principle): States
that each person has basic rights that are
compatible to the basic liberties of others
 Difference principle: States that economic and
social equalities (or inequalities) should be
arranged to provide the most benefit to the
least-advantaged members of society
 Does not advocate for the complete elimination of
inequalities in society
 The most ethical decision seeks to benefit and not
harm disadvantaged populations
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Implementing Principles and Core
Values in Ethical Decision Making

28.  Companies take basic principles and translate them
into core values
 Core values provide the abstract ideals that are
distinct from individual values and daily operational
procedures
 Value practices evolve and are translated into
normative definitions of ethical or unethical
 Individual and organizational values can differ
significantly because of ethical diversity among
individuals
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28
Implementing Principles and Core
Values in Ethical Decision Making

29.  Leaders, stakeholders, and the organizational
culture impact the development of core values
 A firm’s core values provide a blueprint into the
firm’s purpose as well as how it views ethical
decision making and prioritizes stakeholders
 Organizations that have ethics programs based on
a values orientation are found to make a greater
contribution than those based simply on
compliance
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 29
Implementing Principles and Core
Values in Ethical Decision Making

30. Principles and Values
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31. Core Values of Marriott
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1. Put People First
2. Pursue Excellence
3. Embrace Change
4. Act with Integrity
5. Serve Our World
Source: Marriott, 2011 Annual Report, http://investor.shareholder
.com/mar/marriottAR11/index.html (accessed April 19, 2013).

32. Understanding Ethical Decision Making
 Ethical issue intensity, individual factors,
and opportunity result in business ethics
evaluations and decisions
 An organizational ethical culture is shaped by
effective leadership
 Top level support is required for ethical behavior
 An ethical corporate culture needs shared
values and proper oversight
 The more you know about ethical decision
making, the more likely you will be to make
good decisions
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 32