Part Three
The Decision
Making Process

Chapter 5
Ethical Decision
Making

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

1


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

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

2


Framework for Understanding Ethical Decision Making in Business

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

3


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

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

4



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

5


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

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

6


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


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

7


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

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

8


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

9


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

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

10


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

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

11


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

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

12


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

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

13


Most Common Office Supplies Stolen by Employees

1. Post-It notes
2. Tape
3. Scissors
4. Toilet paper
5. Copier paper
6. USB memory sticks

Source: “Top Office Supplies that Are
Stolen and the Average Value of Contents

In A Woman’s Purse!”
KMLE, May 16, 2012,
/>p-office-supplies-that-are-stolen/
(accessed April 12, 2013).

7. Notepads
8. Pens
9. Staplers
10. Highlighters
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,

14


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


15


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

16


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

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

17


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

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

18


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

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

19


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

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

20


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

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


21


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

22


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

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

23


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

24


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

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

25