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Making Ethical Decisions
in Business
Preparedby:
Hamdoon Hussain
B.Sc (Economics), MBA HRM.
Karachi University Business School (K.U.B.S)
Key Objectives
• What is Ethics?
• What are Ethical Decisions?
• Classification of Business Decisions
• Ethical Decision Making Styles
• Framework for Ethical Decision
Making in Business
oEthical Issue Intensity
oIndividual Factors
oOrganizational Factors
oOpportunity
oBusiness Ethics Evaluations and
Intentions
• Using Framework to improve Ethical
Decisions
• Influence of Leadership Styles on
Ethical Decisions
What is Ethics?
• Ethics provides a set of standards for behavior that helps us
decide how we have to act in a range of situations.
• In a sense, we can say that ethics is all about,
a- making choices
b- providing reasons why we should make these choices.
Classification of Business Decisions
• Ethical but Illegal
• Ethical and Legal
• Unethical but Legal
• Unethical and Illegal
Classification of Business Decisions
1)Ethical but Illegal:
• It refers to providing rock-bottom prices only to distributors
in underserved areas.
• Collaborating with other medical clinics to guarantee low
prices in low-income countries.
2) Ethical and Legal:
Producing top quality products • Rewarding integrity
• Providing employee benefits • Contributing to community
• Establishing recycling programs
Classification of Business Decisions
3) Unethical but Legal:
• Promoting PG rated movies to young teens
• Producing products that you know will break before their
time
4) Unethical and Illegal:
• Embezzling money • Engaging in sexual harassment
• Practicing collusion with competitors
• Encouraging fraudulent accounting
What is Ethical Decision Making?
• Ethical decision-making refers to the process of evaluating
and choosing among alternatives in a manner consistent with
ethical principles.
• In making ethical decisions, it is necessary to perceive and
eliminate unethical options and select the best ethical
alternative.
The process of making ethical decisions requires:
1- Commitment: The desire to do the right thing regardless of
the cost.
2- Consciousness: The awareness to act consistently and apply
moral convictions to daily behavior.
3- Competency: The ability to collect and evaluate
information, develop alternatives, and foresee potential
consequences and risks.
Ethical Decision Making Styles
Some of the decision making styles are as follows:
• Individualism
• Altruism
• Pragmatism
• Idealism
• Individualism: Individualism in decision-making entails
making a choice that best serves your long-term self-interest.
In this decision making style, self is the source of all actions.
• Altruism: Altruism in decision making is concerned with
other people. In this style, decision makers relinquished their
own security and self for others.
• Pragmatism: Pragmatic decisions are adjusted and viewed
according to the state of the world. The decision makers are
concerned with situation at hand, not with the self or other.
• Idealism: This style is driven by principles, rules and values.
Their decisions does not change with the circumstances. Any
reason, circumstances or situations does not change those
decisions.
Framework for Ethical
Decision Making in Business
The Ethical Framework is a set of principles and values that
provide a solid foundation for safe and ethical practice
within the organizations.
1- Ethical Issue Intensity
2- Individual Factors
3- Organizational Factors
4- Opportunity
Framework for Ethical Decision
Making in Business
Framework for Ethical Decision Making in
Business
1- Ethical Issue Intensity:
Ethical issue intensity can be defined as the importance of an
ethical issue in the eyes of the individual or organization.
Administrative authority contribute significantly to intensity,
which can influenced by management’s use of rewards and
punishments or corporate policies.
Framework for Ethical Decision Making in
Business
2- Individual Factors
To resolve ethical issues people, people often base their
decisions on their own principles of right or wrong, which they
learn through the socialization process.
a- Gender
b- Age
c- Education
d- Locus of control
a- Gender: women seem to be more sensitive to sensitive
scenarios and less tolerant of unethical actions.
b- Education: the more education or work experience that one
has, the better he or she is at ethical decision making.
c- Age: we believed that age was positively correlated with
ethical decision making. In other words, the older you are, the
more ethical you are.
Framework for Ethical Decision Making in
Business
d- Locus of control: It relates to individual differences in
relation to a generalized belief.
Locus of control is further sub divided as:
a- External control: They believe that the events in their lives
are due to uncontrollable forces. Like luck and chance etc.
b- Internal control: They believe that they control the events
in their lives by their own effort and skill.
Framework for Ethical Decision Making in
Business
3- Organizational Factors:
Organization’s values often have greater influence on decisions
than a person’s own values. The more ethical employees perceive
an organization’s culture to be, the less likely they are to make
unethical decisions.
4- Opportunity:
Opportunity describes the conditions in an organization that limit
or permit ethical or unethical behavior. The absence of
punishment essentially provides an opportunity for unethical
behavior because it allows individuals to engage in such behavior
without fear of consequence.
Framework for Ethical Decision Making in
Business
Business Ethics Evaluations and Intentions
• The results of an ethical decision are often uncertain; no one can
always tell us whether we have made the right decision.
• An individual’s intentions and the final decision regarding what
action he or she will take are the last steps in the ethical decision
making process.
• When the individual’s intentions and behavior are inconsistent
with his or her ethical judgment, the person may feel guilty.
Framework for Ethical Decision Making
in Business
Ethical or Unethical Behavior?
• Guilt or uneasiness is the first sign that an unethical decision
has occurred. The next step is changing one’s behavior to
reduce such feelings.
• This change can reflect a person’s values shifting to fit the
decision or the person changing his or her decision type the
next time a similar situation occurs. Finally, one can eliminate
some of the situational factors by quitting.
Using Ethical Decision Making
Framework to Improve Ethical Decisions
• The Ethical Decision making framework presented cannot
tell you if a business decision is ethical or unethical. The
Framework is not a guide for how to make decisions but is
intended to provide you with insight and knowledge about
typical ethical decision making processes in business
organizations.
Using Ethical Decision Making
Framework to Improve Ethical Decisions
• It is unlikely that an organization’s ethical problem will be
solved strictly by having a thorough knowledge about how
ethical decisions are made.
• We propose that gaining and understanding of typical ethical
decision making in business organizations will reveal several
ways that such decision making could be improved.
Using Ethical Decision Making
Framework to Improve Ethical Decisions
• One important conclusion that should be taken from our
framework is that ethical decision making within an
organization does not rely strictly on the personal values and
morals of individuals.
Influence of Leadership Style in Ethical
Decisions
Influence of Leadership Style in Ethical
Decisions
• Leadership styles influence many aspects of organizational
behavior, including employees’ acceptance of and adherence to
organizational norms and values.
• Ethical leaders need both knowledge and experience to make
decisions.
Influence of Leadership Style in Ethical
Decisions
• Strong ethical leaders have right kind of moral integrity, such
integrity is transparent, or in other words, they do not publicize
others’ issues and keep them private.
• The ethical leader creates a balance that all the people should
be involved in decision making and are working as a team.
Influence of Leadership Style in Ethical
Decisions
• Such a person is always concerned with stakeholders as well
as lowest paid employee. He maintains a balance to give fair
chance of speaking to all the people in the organization.
• Experience shows that no leader can always be right or judge
everyone or even the stakeholders correctly. Similarly, this is
also not mandatory that all the decisions taken by those leaders
will be entirely correct.
Six Leadership Styles

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08. making ethical decisions in business

  • 1. Making Ethical Decisions in Business Preparedby: Hamdoon Hussain B.Sc (Economics), MBA HRM. Karachi University Business School (K.U.B.S)
  • 2. Key Objectives • What is Ethics? • What are Ethical Decisions? • Classification of Business Decisions • Ethical Decision Making Styles • Framework for Ethical Decision Making in Business oEthical Issue Intensity oIndividual Factors oOrganizational Factors oOpportunity oBusiness Ethics Evaluations and Intentions • Using Framework to improve Ethical Decisions • Influence of Leadership Styles on Ethical Decisions
  • 3. What is Ethics? • Ethics provides a set of standards for behavior that helps us decide how we have to act in a range of situations. • In a sense, we can say that ethics is all about, a- making choices b- providing reasons why we should make these choices.
  • 4. Classification of Business Decisions • Ethical but Illegal • Ethical and Legal • Unethical but Legal • Unethical and Illegal
  • 5. Classification of Business Decisions 1)Ethical but Illegal: • It refers to providing rock-bottom prices only to distributors in underserved areas. • Collaborating with other medical clinics to guarantee low prices in low-income countries. 2) Ethical and Legal: Producing top quality products • Rewarding integrity • Providing employee benefits • Contributing to community • Establishing recycling programs
  • 6. Classification of Business Decisions 3) Unethical but Legal: • Promoting PG rated movies to young teens • Producing products that you know will break before their time 4) Unethical and Illegal: • Embezzling money • Engaging in sexual harassment • Practicing collusion with competitors • Encouraging fraudulent accounting
  • 7. What is Ethical Decision Making? • Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with ethical principles. • In making ethical decisions, it is necessary to perceive and eliminate unethical options and select the best ethical alternative.
  • 8. The process of making ethical decisions requires: 1- Commitment: The desire to do the right thing regardless of the cost. 2- Consciousness: The awareness to act consistently and apply moral convictions to daily behavior. 3- Competency: The ability to collect and evaluate information, develop alternatives, and foresee potential consequences and risks.
  • 9. Ethical Decision Making Styles Some of the decision making styles are as follows: • Individualism • Altruism • Pragmatism • Idealism
  • 10.
  • 11. • Individualism: Individualism in decision-making entails making a choice that best serves your long-term self-interest. In this decision making style, self is the source of all actions. • Altruism: Altruism in decision making is concerned with other people. In this style, decision makers relinquished their own security and self for others.
  • 12. • Pragmatism: Pragmatic decisions are adjusted and viewed according to the state of the world. The decision makers are concerned with situation at hand, not with the self or other. • Idealism: This style is driven by principles, rules and values. Their decisions does not change with the circumstances. Any reason, circumstances or situations does not change those decisions.
  • 13. Framework for Ethical Decision Making in Business
  • 14.
  • 15. The Ethical Framework is a set of principles and values that provide a solid foundation for safe and ethical practice within the organizations. 1- Ethical Issue Intensity 2- Individual Factors 3- Organizational Factors 4- Opportunity Framework for Ethical Decision Making in Business
  • 16. Framework for Ethical Decision Making in Business 1- Ethical Issue Intensity: Ethical issue intensity can be defined as the importance of an ethical issue in the eyes of the individual or organization. Administrative authority contribute significantly to intensity, which can influenced by management’s use of rewards and punishments or corporate policies.
  • 17. Framework for Ethical Decision Making in Business 2- Individual Factors To resolve ethical issues people, people often base their decisions on their own principles of right or wrong, which they learn through the socialization process. a- Gender b- Age c- Education d- Locus of control
  • 18. a- Gender: women seem to be more sensitive to sensitive scenarios and less tolerant of unethical actions. b- Education: the more education or work experience that one has, the better he or she is at ethical decision making. c- Age: we believed that age was positively correlated with ethical decision making. In other words, the older you are, the more ethical you are.
  • 19. Framework for Ethical Decision Making in Business d- Locus of control: It relates to individual differences in relation to a generalized belief. Locus of control is further sub divided as: a- External control: They believe that the events in their lives are due to uncontrollable forces. Like luck and chance etc. b- Internal control: They believe that they control the events in their lives by their own effort and skill.
  • 20. Framework for Ethical Decision Making in Business 3- Organizational Factors: Organization’s values often have greater influence on decisions than a person’s own values. The more ethical employees perceive an organization’s culture to be, the less likely they are to make unethical decisions. 4- Opportunity: Opportunity describes the conditions in an organization that limit or permit ethical or unethical behavior. The absence of punishment essentially provides an opportunity for unethical behavior because it allows individuals to engage in such behavior without fear of consequence.
  • 21. Framework for Ethical Decision Making in Business Business Ethics Evaluations and Intentions • The results of an ethical decision are often uncertain; no one can always tell us whether we have made the right decision. • An individual’s intentions and the final decision regarding what action he or she will take are the last steps in the ethical decision making process. • When the individual’s intentions and behavior are inconsistent with his or her ethical judgment, the person may feel guilty.
  • 22. Framework for Ethical Decision Making in Business Ethical or Unethical Behavior? • Guilt or uneasiness is the first sign that an unethical decision has occurred. The next step is changing one’s behavior to reduce such feelings. • This change can reflect a person’s values shifting to fit the decision or the person changing his or her decision type the next time a similar situation occurs. Finally, one can eliminate some of the situational factors by quitting.
  • 23. Using Ethical Decision Making Framework to Improve Ethical Decisions • The Ethical Decision making framework presented cannot tell you if a business decision is ethical or unethical. The Framework is not a guide for how to make decisions but is intended to provide you with insight and knowledge about typical ethical decision making processes in business organizations.
  • 24. Using Ethical Decision Making Framework to Improve Ethical Decisions • It is unlikely that an organization’s ethical problem will be solved strictly by having a thorough knowledge about how ethical decisions are made. • We propose that gaining and understanding of typical ethical decision making in business organizations will reveal several ways that such decision making could be improved.
  • 25. Using Ethical Decision Making Framework to Improve Ethical Decisions • One important conclusion that should be taken from our framework is that ethical decision making within an organization does not rely strictly on the personal values and morals of individuals.
  • 26. Influence of Leadership Style in Ethical Decisions
  • 27. Influence of Leadership Style in Ethical Decisions • Leadership styles influence many aspects of organizational behavior, including employees’ acceptance of and adherence to organizational norms and values. • Ethical leaders need both knowledge and experience to make decisions.
  • 28. Influence of Leadership Style in Ethical Decisions • Strong ethical leaders have right kind of moral integrity, such integrity is transparent, or in other words, they do not publicize others’ issues and keep them private. • The ethical leader creates a balance that all the people should be involved in decision making and are working as a team.
  • 29. Influence of Leadership Style in Ethical Decisions • Such a person is always concerned with stakeholders as well as lowest paid employee. He maintains a balance to give fair chance of speaking to all the people in the organization. • Experience shows that no leader can always be right or judge everyone or even the stakeholders correctly. Similarly, this is also not mandatory that all the decisions taken by those leaders will be entirely correct.