business ethics chapter 5

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© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,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. 1

Chapter 5

Ethical Decision

Making

Part ThreeThe Decision Making Process


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In business, people make decisionsdifferently than at home

Organizational pressures have a strong influenceThe ethical decision making process includes

Ethical issue intensityIndividual factorsOrganizational factors

The framework for ethical decision makingdoes not describe how to make ethicaldecisions

Outlines the factors and processes related toethical decision making

2© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,

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.


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3

Framework for Understanding EthicalDecision Making in Business

© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,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.


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The perceived relevance or importance ofan ethical issue to the individual, workgroup, and/or organization

Reflects the ethical sensitivity of theindividual and/or work group

Triggers the ethical decision making process




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Individuals are subject to six spheres ofinfluence…

Workplace Legal system

Family Community

Religion Profession

Moral intensity : Relates to a person’sperception of social pressure and the harmhis/her decision will have on others




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People base their ethical decisions on theirown values and principles of right or wrong

Values are learned through socializationGood personal values decrease unethical behaviorand increase positive work behavior Values are subjective; vary across cultures




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An organization may intend to do right, butorganizational or social forces can alter thisintentResearch shows that various factors influenceethical behavior

Gender —women are more ethical than menEducation, work experience, nationality, and ageaffect ethical decision making




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Relates to individual differences inrelation to a general belief about how oneis affected by internal versus external

events or reinforcements




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Managers with…External locus of control go with the flow

because that’s all they can doInternal locus of control believe they cancontrol events; are masters of their destinies andtrust in their capacity to influence their

environmentUnclear relationship between locus ofcontrol and ethical decision making




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Organizational culture has a strongerinfluence on employees than individual values

Corporate culture : A set of values, norms,and artifacts that members of an

organization shareEthical culture : Reflects whether the firm has anethical conscience; is a function of many factors




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Significant others : Those who haveinfluence in a work groupObedience to authority : Helps to explain why many employees unquestioningly followsuperior’s orders




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The conditions in an organization thatlimit/permit ethical/unethical behaviorImmediate job context : Where employees work, with whom they work, and the natureof the work




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Opportunities for misconduct can bereduced by establishing formal codes,

policies, and rules Aggressive enforcement is required Knowledge can sometimes lead to unethicalbehavior

A person who has an information base, expertise,or information about competition has anopportunity to exploit knowledge




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Most Common Office SuppliesStolen by Employees


Source: “Top Office Supplies that AreStolen and the Average Value of ContentsIn A Woman’s Purse!”KMLE, May 16, 2012,http://kmle1079.cbslocal.com/2012/05/16/to p-office-supplies-that-are-stolen/(accessed April 12, 2013).

1. Post-It notes

2. Tape

3. Scissors

4. Toilet paper5. Copier paper

6. USB memory sticks

7. Notepads

8. Pens

9. Staplers

10. Highlighters


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Impossible to objectively determine if abusiness decision is right or wrong

Understanding how ethical decisions are

made will not solve ethical problemsBusiness ethics involves value judgments andcollective agreement about acceptable patterns ofbehavior

Ethical decision making in business does notrely on personal values and morals

Organizations take on cultures of their ownInformal relationships enforce an ethical culture




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Normative approaches : Howorganizational decision makers shouldapproach an issue

Different from a descriptive approach thatexamines how organizational decision makersapproach ethical decision making

Concepts like fairness and justice are highlyimportant in a normative structure




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Most organizations develop a set of core values to provide enduring beliefs aboutappropriate conduct

Core values are central to an organization and provide direction for action

By incorporating stakeholder objectives intocorporate core values, companies begin to view stakeholders as significant




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Institutions are important in establishing afoundation for normative valuesOrganizations face certain normativepressures from different institutions to act acertain way

Internally and/or externallySort institutions into three categories: Political,economic, and social




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Political influences can take place within theorganization

An ethical organization has policies and rulesin place to determine appropriate behaviorOften the compliance component of the

firm’s organizational cultureFailure to abide by these rules results indisciplinary action




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Normative business ethics takes into accountthe political realities outside the legal realm

in the form of industry standardsLegal issues such as price fixing, antitrustissues, and consumer protection areimportant in maintaining a fair and equitable

marketplaceThese issues must be major considerations forbusiness when making ethical decisions




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Competition affects how a company operatesas well as the risks employees take for thegood of the firm

Amount of competition in an industry can bedetermined/described according to…Barriers to entry into the industry Available substitutes for the products produced by

the industry rivalsPower of the industry rivals over their customersPower of the industry rivals’ suppliers over theindustry rivals




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Social institutions include religion,education, and individuals such as the familyunit

There are laws meant to ensure anorganization acts fairly, but there are no lawssaying people should do to others as they would prefer to have done to them

Many cultures adopt this rule that has beeninstitutionalized into businesses with standardson competing fairly, being transparent withconsumers, and treating employees with respect




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Industry shared values promoteorganizational effectiveness when linked togoals

Can also hinder effectiveness if more efficientmeans of organization and structure are avoidedin exchange for stability

Risk that organizations might sacrifice new ideas

or methodologies in order to be more acceptableCan limit innovativeness and productivity

Important that organization does not straytoo far from industry norms and values




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When values from political, economic, andsocial institutions are embedded into the

organizational culture to provide incentivesfor appropriate behavior, firms tend to actmore socially responsibleIf incentives do not align with institutionalnormative values or if they contradict these values, then misconduct is likely




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John Rawls was one of the most influentialphilosophers in his research on how

principles support the concept of justice Veil of ignorance: A thought experiment thatexamined how individuals would formulateprinciples if they did not know what their

future position in society would beIdentified principles that were not biased by one’ssocial position




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Two main principles of justice…Liberty principle (equality principle): States thateach person has basic rights that are compatible

to the basic liberties of othersDifference principle: States that economic andsocial equalities (or inequalities) should bearranged to provide the most benefit to the least-advantaged members of society

Does not advocate for the complete elimination ofinequalities in societyThe most ethical decision seeks to benefit and not harmdisadvantaged populations




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Companies take basic principles andtranslate them into core valuesCore values provide the abstract ideals that

are distinct from individual values and dailyoperational procedures Value practices evolve and are translated intonormative definitions of ethical or unethicalIndividual and organizational values candiffer significantly because of ethicaldiversity among individuals




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Leaders, stakeholders, and the organizationalculture impact the development of core values

A firm’s core values provide a blueprint intothe firm’s purpose as well as how it viewsethical decision making and prioritizesstakeholders

Organizations that have ethics programsbased on a values orientation are found tomake a greater contribution than those basedsimply on compliance




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Principles and Values



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Core Values of Marriott


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).


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Ethical issue intensity, individual factors,and opportunity result in business ethicsevaluations and decisions

An organizational ethical culture is shapedby effective leadershipTop level support is required for ethical behavior

An ethical corporate culture needs shared

values and proper oversightThe more you know about ethical decisionmaking, the more likely you will be to makegood decisions

business ethics chapter 5

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