ETHICAL DECISION MAKING IN BUSINESS

DECISION MAKING
Business Decision Unethical and Illegal
1. Departmental Pressure 2. Need For Cutting and Enhancing Profit 3. Maintaining the Reputation of the Company 4. Considering the Interest of Pressure Group 5. Pressure of Stakeholder

Ethical and Moral

ETHICAL MODELS
Several theories developed over the years Theories offer benchmarks to set standards They help develop the basis for normative judgment These theories are not followed by business theorists, Reasons

Ethical theories and their relevance to business research are not easily understood by business theorists Ethical theories are difficult to put under practice

Some writers have developed models of professional standards, based on some of the theories Three most prominent models, used more than any other models are

Rights Theories Justice Theories

RIGHTS THEORY
Advocated by Emmanuel Kant and John Locke Stress on Personal Rights and importance of property rights Both proponents focused on the entitlement of individuals as persons with Dignity It held the view that ethical decisions should protect the legal and moral rights that an individual is entitled to Following rights were included Free Consent Freedom of conscience Privacy Free Speech Due Process

JUSTICE THEORY
Chronologically precedes Rights Theory Rooted in the age of Plato and Aristotle in the fifth century BCE Advocates that all person should be guided by

Fairness Justice Equity Impartiality

In Modern context, all humans should be treated equally Unequal treatment should be on defensible reasons ONLY This is Impractical as no man is equal and comparing unequal as equal is unjust Thus, People should be treated equitably, i.e. Equality based on justice

UTILITARIANISM THEORY
Ethical theory holds the view that an action is right if it maximizes utility or produces the greatest good for the largest number of people. Employs a teleological approach i.e actions should be evaluated in terms of their consequences. A certain action might not produced the greatest benefit. But in the long run it will result in decisions that will lead to the greatest for the people concerned. Utilitarianism based decisions are unethical when

Personal gains are involved. Inefficient outcomes.

THE VIRTUE APPROACH

Ancient

ethical concept, it advocates that ethical actions should be consistent with certain morally accepted virtues. It is not what is adjusted morally but also what is accepted to a mature person endowed with a good moral character. The importance is on external virtues that everyone would like to showcase and will be referred to as role models

THE COMMON GOOD APPROACH

Just

like Justice Theory approach - was advocated by Greek philosophers. It draws attention to certain conditions, effective system of law and order, fire service, health care etc. The establishment and maintenance of these conditions are imperative to promote the overall welfare of the society.

WHICH APPROACH TO USE ?

According

to Ethicsts Velasuez, Cavanagh and Moberg, the decision should be based on the criteria of utility, rights and justice together. If in case the approach falls then it is considered unethical. Carol suggested an ethics screen which includes : Ethical principles Ethical tests Standards based on the personal, organizational or the societal as per the case.

ETHICAL DECISION MAKING WITH CROSS-HOLDER AND COMPETITION

Decision

should be based on more important obligation between two or more conflicting obligations.
that produce greater results or the less harm should be taken .

Actions

APPLYING MORAL PHILOSOPHY TO ETHICAL

DECISION MAKING

Can

be different at corporate level and domestic level

For

e.g.: 1. Preparing a budget

2. Competition and Top Management in the organization

FALL OF ENRON
Enron

chairman Kenneth Lay and CEO Preached 4 core values to his employees 1. Communication 2. Respect 3. Integrity 4. Excellence Observed more in Breach rather than Practice
o

Success was their only Mantra

UNIVERSALLY ACCEPTED ETHICAL ORG

Infosys

technologies It was possible without any semblance of doubt, that Infosys a highly ethical organization due to moral leadership provided by its founder chief mentor N.R. Narayan Murthy

CORE VALUES FROM TOP TO BOTTOM

Corporate

Houses develop mission statement on set of core values or corporate culture that reflect their philosophy of relating to their stakeholders and complying with the legal system and regulatory bodies.
- Tylenol Crisis and its handling by J&J

E.g.

BUSINESS BEHAVIOR
In

India, paying commission to get a contract has become a norm. achieving a fast track growth and exponential career graph, people resort to such unethical practices.

For

General

Outlook -If you cant beat them, join

them.

KOHLBERGS MODEL OF COGNITIVE MORAL DEVELOPMENT

Universal Ethical Principles

Prior Right, Social Contract or Utility

Social System and Conscience Maintenance Mutual Interpersonal Expectations, relationship And Conformity
Individual Instrumental Purpose and Exchange

Punishment and Obligation

INFLUENCE ON ETHICAL DECISION MAKING

Three

major influence - personal moral standards, workplace ethics and culture, and the nature of the issue concerned. or in collusion with others, people resort to several practices that can be considered unethical like discounts, convincing consumers to buy product they do not require and selling poor quality products. of opinion as to what constitutes ethical behavior.

Individual

Differences

WORK PLACE ETHICS

Sets

of values that are part of the workplacecorporate culture, set of beliefs, values, goals, norms, and the manner of solving problems that workers of the organisation share. the contrary, if the organisation culture is one of haughtiness, one-unmanship, or do-what-youlike, but-bring-us-business-and-profit-type of attitude as it was in case of Enron and Reliance, conflicts between personal and professional role arebound to arise

On

PERSONAL VALUES AND ETHICAL DECISION MAKING

Ethical

decision maker should develop certain values - six pillars of character

Trustworthiness

honesty,integrity,loyalty

Respect Responsibility Fairness Caring Citizenship

CORPORATE VALUES
AND ETHICAL DECISION

MAKING

Corporate

Culture influences a persons values and moral standards more than his/ her personal views Ethical climate is influenced by the culture e.g. enron Ethical climate is also affected by formal & informal groups (grapevine) Conflict of interest personal v/s organizational

ROLE OF CORPORATE GOVERNANCE IN ENSURING ETHICS AT THE WORKPLACE

Corporate

governance centers around

Values Integrity Accountability Transparency Full disclosure (financial/non-financial)

Best internationally accepted corporate governance practices help in

Mitigating conflicts among employees Help minimize ethical dilemmas

FRAMEWORK OF ETHICAL DECISION MAKING

Ethical Decision Making Is A Tough TaskEthical dilemma. Ethical decision making is more complex in organizational context. Has to face: - Culture, structure, goals Individual Moral Values may not gel with organizational values.

PROCESS OF TAKING AN ETHICAL DECISION

Recognize And Identify The Kind Of Ethical Issue You Need To Resolve - Company Has To Reconcile All The Conflicting Interests Before They Make Any Decision Pause And Think Make Sure Of Your Goals Get Your Facts Right Evaluate Choices From Different Ethical Perspectives - On Basis Of Right, Virtue, Justice Or Common Good. Consider Consequences Make A Decision Act, Then Reflect On The Decision Later - Personal Moral Standards, Workplace Ethics And Culture, Nature Of Issue Concerned.

CONCLUSION

TAKE CHOICE SERIOUSLY GOOD DECISION ARE BOTH EFFECTIVE AND ETHICAL DISCERNMENT AND DISCIPLINE