Ethical Decision Making

(Descriptive Principles)

&

Managing Business Ethics

Making Decisions in Business Ethics

Descriptive Ethical Theories
Descriptive business ethics theories seek to describe how ethics decisions are actually made in business, and what influences the process and outcomes of those decisions.
The first step in ethical-decision making is to recognize that an ethical issue requires an individual or work group to choose among several actions that various stakeholders inside or outside the firm will ultimately evaluate as right or wrong.

Main factors in deciding the moral status of a situation

Decision likely to have significant effects on others Decision likely to be characterised by choice, in that alternative courses of action are open Decision is perceived as ethically relevant by one or more parties

Ethical decision-making process i.e. stages

Recognis e moral issue

Make moral judgement

(Role of normative theories: rights, duty, consequences, etc)

Establish moral intent

Engage in moral behaviour

Source: Derived from Rest (1986), as cited in Jones (1991).

Influences: ethical decision-making

Individual factors - unique characteristics of the individual making the relevant decision
Given at birth Acquired by experience and socialisation

Influences on ethical decisionmaking

Situational factors - particular features of the context that influence whether the individual will make an ethical or unethical decision
Work context The issue itself including
Intensity ethical framing

AGE GENDER EDUN PERSONALITY ATTITUDES

Recognise moral issue

Individual factors

REWARDS JOB ROLES ORG CULTURE

Make moral judgement

Establish moral intent

Engage in moral behaviour

Limitations *
Situational factors

Individual influences on ethical decision-making

Factor Age and gender Influence on ethical decision-making Very mixed evidence leading to unclear associations with ethical decision-making. Appear to have a significant effect on ethical beliefs, as well as views of what is deemed an acceptable approach to certain business issues. Somewhat unclear, although some clear differences in ethical decision-making between those with different educational and professional experience seem to be present.

National and cultural characteristics

Education and employment Psychological factors: Cognitive moral development Locus of control Personal Values

Small but significant effect on ethical decision-making. At most a limited effect on decision-making, but can be important in predicting the apportioning of blame/approbation. Significant influence some empirical evidence citing positive relationship.

Personal integrity

Significant influence likely, but lack of inclusion in models and empirical tests.

Moral imagination

A new issue for inclusion with considerable explanatory potential.

Cognitive Moral Development

Cognitive Moral Development contd..

Situational influences on ethical decision-making

Type of factor Issue-related Factor Influence on ethical decision-making

Moral intensity Moral framing Rewards

Authority
Contextrelated

Bureaucracy

Work roles Organizational culture National Context

Reasonably new factor, but evidence suggests significant effect on ethical decision-making. Fairly limited evidence, but existing studies show strong influence on some aspects of the ethical decision-making process, most notably moral awareness. Strong evidence of relationship between rewards/punishments and ethical behaviour, although other stages in ethical decision-making have been less investigated. Good general support for a significant influence from immediate superiors and top management on ethical decision-making of subordinates. Significant influence on ethical decision-making well documented, but actually exposed to only limited empirical research. Hence, specific consequences for ethical decision-making remain contested. Some influence likely, but lack of empirical evidence to date. Strong overall influence, although implications of relationship between culture and ethical decision-making remain contested. Limited empirical investigation, but some shifts in influence likely.

Managing Business Ethics

What is business ethics management?

Business ethics management is the direct attempt to formally or informally manage ethical issues or problems through specific policies, practices and programmes

Mission or values statements Codes of ethics Reporting/advice channels Risk analysis and management Ethics managers, officers and committees Ethics consultants Ethics education and training Stakeholder consultation, dialogue and partnership programs Auditing, accounting and reporting

Typical components of business ethics management

PLUS Framework to Manage Ethics

P = Policies Is it consistent with my organization's policies, procedures and guidelines? L= Legal Is it acceptable under the applicable laws and regulations? U = Universal Does it conform to the universal principles/values my organization has adopted? S= Self Does it satisfy my personal definition of right, good and fair?
PLUS presumes effective communication with all employees so there is a common understanding of: the organization's policies and procedures as they apply to the situation. the applicable laws and regulations. the agreed to set of "universal" values - in this case Empathy, Patience, Integrity, Courage (EPIC) the individual's sense of right, fair and good springing from their personal values set.

Ethics, Economics, and Law

3 Models of Management Ethics

1. Immoral ManagementA style devoid of ethical principles and active opposition to what is ethical. 2. Moral ManagementConforms to high standards of ethical behavior. 3. Amoral Management
Intentional - does not consider ethical factors Unintentional - casual or careless about ethical considerations in business

3 Models of Management Morality and Emphasis on CSR

Setting standards of ethical behaviour- Codes

Codes of ethics are voluntary statements that commit organizations, industries, or professions to specific beliefs, values, and actions and/or set out appropriate ethical behaviour for employees
4 main types of ethical codes
Organizational or corporate codes of ethics Professional codes of ethics Industry codes of ethics Programme or group codes of ethics

Content of codes and ethics:

Prevalence of issues found in codes of conduct
70 60

50

40 % of codes featuring issue 30 60 59 48 20 23 10

20

18 11

0 Labour standards Environmental stew ardship Consumer protection Bribery Competition Information disclosure Science & technology

1 Taxation

Type of issue

Source: OECD (2001:8 )

Critiques of ethical codes

Clear prescription for employees means lack of flexibility Difficulty with multiple/novel situations, particularly cross-cultural Vague, generalised statements of obligation PR device Questionable control mechanisms that potentially influence employee beliefs, values and behaviours suppress individual moral instincts and emotions in order to ensure bureaucratic conformity and consistency

Effectiveness of codes of ethics

Effectiveness of a code is in the implementation and administration Suggestions for successful implementation
Maximise participation of organisation members in development stage to encourage commitment and buy in (Newton, 1992) Discipline employees found in breach (Webley 2001) Follow-through (Trevio et al. 1999)

Managing stakeholder relations

Assessing stakeholder importance: an instrumental perspective Instrumental perspective
Stakeholder impact analysis enable a company to identify the stakeholders most crucial to its survival and to make sure that the satisfaction of their needs is paramount (Hill and Jones 2001:45) 3 key attributes likely to determine perceived importance or
salience of stakeholders (Mitchell et al., 1997)
Power Legitimacy Urgency

Assessing ethical performance

Ethical
Often a focus on internal management systems

Environmental
Impact on natural environment

Social
Broader remit, often including impact on stakeholders

Sustainability
Focus on triple bottom line

Social accounting as generic term

Social accounting
Social accounting is the voluntary process concerned with assessing and communicating organisational activities and impacts on social, ethical, and environmental issues relevant to stakeholders
Both practical and moral reasons Four main issues:
Disincentives for social accounting:
Perceived high costs Insufficient information Inadequate information systems Lack of standards Secrecy Unwillingness to disclose sensitive or confidential data

Internal and external pressure Identifying risks Improved stakeholder management Enhanced accountability and transparency

Organizing for business ethics:

Formal ethics programmes
Compliance orientation

Four ways of organizing for business ethics management

Values orientation External orientation Protection orientation

Source: Trevino et al. (1999)

Informal ethics management:

ethical culture and climate Organizations can and should proactively develop an ethical organizational culture organizations with ethics problems should take a culture change approach to solving them (Trevio and Nelson, 2007: 256)
Culture change approach (very problematic) Improvements in ethical decision-making have been widely argued to require a managed transformation of the organizations values in order to create a more ethical culture Cultural learning approach (promotes moral imagination) Focus on smaller subcultural groups within the firm Factionalism and dissent in order to promote learning (Starkey 1998)

Business ethics and leadership

Leaders often said to set ethical tone in organisations All leadership is value laden (Grint, 1997:325) Cultural change approach
Leaders role to articulate and personify the values the organisation aspires to Inspire and motivate employees to follow their lead

Cultural learning perspective

Role of leadership one of participation and empowerment in order to foster moral imagination and autonomy

Ethical behaviour is not to be promoted simply through the promulgation of specific beliefs and principles, but through facilitating personal moral engagement, dialogue, and choice (Crane, Knights, and Starkey 2008)

For Reference:
Types of stakeholder relationship
Challenge Sparring partners One-way support Mutual support Endorsement Project dialogue Strategy dialogue Task force Joint venture or alliance

For reference: What makes for good social accounting?

Inclusivity Schemes like: Auditing and certifying: Social accountability Comparability standards SA 8000; Reporting :The Global Reporting Initiative (GRI); Completeness Reporting assurance: AA1000S Assurance Standard Evolution Management policies and systems Disclosure External verification Continuous improvement

Social accounting established by The Body Shop

Stakeholder dialogue Policy review Determination of audit scope

Publication of report

Verification

Agreement of standards and performance indicators

Agreement of objectives

Stakeholder consultation

Preparation of accounts and internal reports

Stakeholder surveys Internal audit

Derived from Sillanp and Wheeler (1997) and Sillanp (1998)