Ethical Dilemma, Sources and

their Resolutions

Dr. Anita Singh

What is Business
dilemma?
A business dilemma exists when an
organizational decision maker faces a choice
between two or more options that impact on
A) Organizational profitability and
competitiveness and its
B) Stakeholders.
Corporate Dilemma over
Ethics
People in business come across several ethical
problems that leads to ethical dilemmas. For
e.g.
They feel that there is lack of clear linkage
between business ethics and financial success;
They are not clear as to how much they should
invest in the business ethics system;
They are unclear about the right balance
between the business ethics and the investment
required for the same.
Sources of ethical
Problem
I .Failure of Personal Character:
People whose personal values are not
desirable embezzle fund ,steal supplies from
the companies, pad expense amount, takes
unjustified leaves, shirk obligation to fellow
workers, take bribes for favourable supplies,
use inside information for their personal
interest.
Conflict of Personal Values and
Organizational goal :

The company use methods to pursue the

goals unacceptable to the managers.
IV. Personal Beliefs vs.
Organizational Practices
Ethical dilemmas in organization arise when
they employ multicultural and multi religious
employees. Several organizations are accused
of racial discrimination and gender bias in the
workplace and paying fines of billions of
dollars or opting for out of the court
settlements.
V. Production and sale of hazardous
but popular products
Where is the ethical burden lie, when business
sells product known to be actually or
potentially harmful to the society?
Is the principle of Caveat Emptor in
merchantile law adapted suitably?
Should individual rights and free choice
override social cause?
Why do business have such a
negative image?
Competitive pressures, individual greed, and
differing cultural context generate ethical
issues for organizational manager.
In almost every organization some people
behave unethically necessitating system to
ensure that such behaviour is either stopped
or detected (after unethical behaviour occurs)
and remedied ..
Why should business act ethically?
There are numerous reasons why business
should act ethically:
To protect the stakeholders interest.
To prevent harm to the general public.
To build trust to key stakeholders.
To protect themselves from abuse and
unethical employees and competitors.
To protect their own employees and create an
environment in which workers can act in ways
consistent with their values. .
How corporate are observing ethics
in their organizations
Organizations have started implementing
ethical behavior by following actions:
Publishing in house code and ethics.
Employing people with high standards of
ethical values at the top.
Started to incorporate consideration of
ethics into performance reviews.
Starting to reward ethical behaviour.
Conducting an ethics audit.
Code of Personal Ethics for
employees
Most company codes list the following values
being expected from their employees.
Respect confidential information to which you
have access.
Maintain high standard of professional
responsibility.
Avoid being placed in situation involving
conflict of interest.
Code of Personal Ethics for
employees contd.....
Most company codes list the following values
being expected from their employees
Act with integrity.
Do not get biased against anybody or anything.
Maintain professional relations based on mutual
respect for individuals and organizations.
Be committed to the goal of the organization.
Do not give up your individual and professional
ethics.
How to create an ethical working
environment

Make decisions to commit to ethics.

Recognise that you are a role model by
definition, by your action , by your values.
Assume the responsibility for instilling ethical
behaviour.
How do we establish ethical
standards
Think and reflect about yourself, about
management ,about the people and about the
relationship and the values which you would
like to incorporate.
Create time for thinking.
Reflect
Periodically take time off to reflect and
consider, 'when I am, where I have to go,
and how I am going there.
1V. Investment Model
This model focuses on the organization as
entity. And thus on the long term profits and
on the survival. In the name of the enlighten
self interest, it gives some recognition to
social with economic ones.
The above six models may be thought of as
points on a continuum from low to high social
responsibility .

Result: employees become proud of their

performance, and develop sense of
belongingness and creativity .
Regardless of the model adopted by an
organization , one of its most important job is
to establish and blend its value together so
that it become a consistent, effective system
that is known and accepted by the fair primary
claimant group investors, employees,
customers and society including the
government.
The system must be strong enough to withstand
changes by partisans pressure group but
flexible to move with the changing society.
Ask Three Questions
To resolve these questions which create a
dilemma ,ask three questions:

1.Utility: do the benefit exceed

cost(shareholder)?

2.Rights: do they respect human rights?

(society)

3.Justice : does it distribute benefit and

burden evenly?(employees)
How to resolve ethical dilemma?
Two basic approaches are used in resolving
ethical dilemmas: Deontological and Teleological
Deontological(Action oriented approach)
An ethical standard consistent with the fact that
it is performed by a rational and free person.
These are the rights of the human being and
reflect the characteristic and defining feature of
our nature.
These fundamental rights are inherent in our
nature and universally recognized.
How to resolve ethical dilemma?
Contd.
Teleological ( result oriented)Ethics:
The moral character depends on simple,
practical matter of the extent to which actions
actually helps or hurt people.
Actions that produces more benefits than
harm are right and those ; that dont are
wrong.
How to resolve ethical dilemma?
Contd.
Centre for Business and Ethics offers a brief
Three step Strategy, in both Deontological
and Teleological "approaches converge:

Step1: Analyze the consequences.

Step2: Analyze the actions
Step3:Make a decision.
Corporate governance is the process and
structure used to direct and manage the
business and affairs of the company towards
enhancing business prosperity and corporate
accountability with the ultimate objective of
realizing long-term shareholder value, whilst
taking into account the interest of other
stakeholders
Corporate Governance refers to the manner in which
the power of a corporation is exercised in the
stewardship of the corporations total portfolio of
assets and resources with the objective of maintaining
and increasing shareholder value and satisfaction of
other stakeholders in the context of its corporate
mission. It is concerned with creating a balance
between economic and social goals and between
individual and communal goals while encouraging
efficient use of resources, accountability in the use of
power and stewardship and as far as possible to align
the interests of individuals, corporations and society.
Good governance is not simply about
corporate excellence. It is the key to economic
and social transformation. The corporation of
today are no longer sheer economic entities.
These are the engines of economic and social
transformation.
-Dr Madhav Mehra, President of World
Council For
Corporate
Governance
Corporate Governance of an
Organisation
Effective corporate governance requires a clear
understanding of the respective roles of the board
and of senior management and their relationships
with others in the corporate structure. The
relationships of the board and management with
stockholders should be characterized by candor;
their relationships with employees should be
characterized by fairness; their relationships with
the communities in which they operate should be
characterized by good citizenship; and their
relationships with government should be
characterized by a commitment to compliance.
Corporate Governance involves a set of
relationships and the networks between a
companys management, its board of
directors, its shareholders and stakeholders.
Good corporate governance practice ensures
the shareholders a fair rate of return
Fundamental Pillars of Corporate
Governance

ACCOUNTABILITY
TRANSPARENCY
RESPONSIBILITY
FAIR TREATMENT
Accountability Clarifying governance roles &
responsibilities, and supporting voluntary
efforts to ensure the alignment of managerial
and shareholder interests and monitoring by
the board of directors capable of objectivity
and sound judgment.

Transparency Requiring timely disclosure of

adequate information concerning corporate
financial performance
Responsibility Ensuring that corporations
comply with relevant laws and regulations
that reflect the societys values

Fairness Ensuring the protection of

shareholders rights and the enforceability of
contracts with service/resource providers
of
Moral
Development
Moral Development
Moral
development
is the gradual
development of an
individuals concept
of right or wrong
conscious, religious
values, social
attitudes and certain
behaviour.
 Kohlberg's theory
This theory is a stage theory. In other words, everyone goes
through the stages sequentially without skipping any stage.

However, movement through these stages are not natural, that

is people do not automatically move from one stage to the next
as they mature. In stage development, movement occurs when
a person notices inadequacies in his or her present way of
coping with a given moral dilemma.

According to stage theory, people cannot understand moral

reasoning more than one stage ahead of their own. For
example, a person in Stage 1 can understand Stage 2 reasoning
but nothing beyond that.
Kohlbergs Six Stages

Pre-Conventional Moral
Development
Stage 1
Stage 2
Conventional Moral Development
Stage 3
Stage 4
Post-Conventional Moral
Development
Stage 5
Stage 6
Level 1: Preconventional Morality 0-
9 years

Stage 1 - Obedience and Punishment

Especially common in young children, but adults are capable of
expressing this type of reasoning. At this stage, children see rules as
fixed and absolute.

Obeys rules in order to avoid punishment

Determines a sense of right and wrong by what is punished and what
is not punished
Obeys superior authority and allows that authority to make the rules,
especially if that authority has the power to inflict pain
Is responsive to rules that will affect his/her physical well-being
Stage 2 Naively egotistical
At this stage of moral development, children account for
individual points of view and judge actions based on how they
serve individual needs. Reciprocity is possible, but only if it
serves one's own interests.

Is motivated by vengeance or an eye for an eye philosophy

Is self-absorbed while assuming that he/she is generous
Believes in equal sharing in that everyone gets the same,
regardless of need
Believes that the end justifies the means
Will do a favor only to get a favor
Expects to be rewarded for every non-selfish deed he/she
does
Level 2: Conventional Morality 10-15 years

Stage 3 - "good boy-good girl" orientation,

This stage of moral development is focused on living up to
social expectations and roles. There is an emphasis on
conformity, being "nice," and consideration of how choices
influence relationships.

Finds peer approval very important

Feels that intensions are as important as deeds and expects
others to accept intentions or promises in place of deeds
Begins to put himself/herself in anothers shoes and think
from another perspective
Level 2: Conventional Morality 10-15 years

Stage 4 Law and Social Order

At this stage of moral development, people begin to
consider society as a whole when making judgments.
The focus is on maintaining law and order by following
the rules, doing ones duty, and respecting authority.

Is a duty doer who believes in rigid rules that should not be

changed
Respects authority and obeys it without question
Supports the rights of the majority without concern for those
in the minority
Is part of about 80% of the population that does not progress
past stage 4
Level 3: Post conventional Morality 16+

Stage 5 - Legalistic Social Contract

At this stage, people begin to account for the differing values,
opinions, and beliefs of other people. Rules of law are important
for maintaining a society, but members of the society should
agree upon these standards.

Is motivated by the belief in the greatest amount of good for

the greatest number of people
Believes in consensus (everyone agrees), rather than in
majority rule
Respects the rights of the minority especially the rights of the
individual
Believes that change in the law is possible but only through the
system
Stage 6 Universal ethical Principles
Kolhbergs final level of moral reasoning is based
upon universal ethical principles and abstract
reasoning. At this stage, people follow these
internalized principles of justice, even if they conflict
with laws and rules.
Believes that there are high moral principles than those
represented by social rules and customs
Is willing to accept the consequences for disobedience of the
social rule he/she has rejected
Believes that the dignity of humanity is sacred and that all
humans have value
Criticisms of Kohlberg's
Theory of Moral Development:
Does moral reasoning necessarily lead to moral behavior? Kohlberg's
theory is concerned with moral thinking, but there is a big difference
between knowing what we ought to do versus our actual actions.

Is justice the only aspect of moral reasoning we should consider?
Critics have pointed out that Kohlberg's theory of moral development
overemphasizes the concept as justice when making moral choices.
Other factors such as compassion, caring, and other interpersonal
feelings may play an important part in moral reasoning.

Does Kohlberg's theory overemphasize Western philosophy?
Individualistic cultures emphasize personal rights while collectivist
cultures stress the importance of society and community. Eastern
cultures may have different moral outlooks that Kohlberg's theory
does not account for.