Descriptive Ethical Theories in Business Decision Making

Making Decisions in Business Ethics
(Descriptive Ethical Theories)
Lecture 4
(Ch.4)
(Revised on 12 Feb. 2019)
1
Overview
1. Decision with ethical perspective
2. Meaning of Descriptive Ethical Theories
3. Relationship between Descriptive Ethical Theories &
Normative Ethical Theories
4. Ethical decision-making (4 stages)
5. Understanding (i) individual factors & (ii) situational
factors which affect ethical decision-making in
workplace.
2
1. Decision with ethical perspective
What is an ethical decision?
1. Not each decision has ethical perspective
(e.g. For a simple decision such as using black or dark blue colour pen on documents in
office; people may not care about it.)
(e.g. Lantau Tomorrow Vision)
2. Normally the decision will involve ethical issue when it is

controversial.
(e.g. breach of human rights, insider trading, embezzlement, etc.)
3. Normally it is likely that:

a) Decision involves significant effects on others
(e.g. workers lost their jobs/incomes under a huge lay-off plan);
b) Alternative options are available
(e.g. Manager can choose whether to shut down/ not to shut down the factory);
c) Decision is perceived as ethically relevant by others*
(e.g. many of the workers opine that the laid off is unethical when the company is
profitable) 3
*P.122, Crane & Matten (2016)
2. Meaning of Descriptive Ethical Theories
1. Descriptive ethical theories:
• Not setting the norm, but describing what people actually do
(in commercial context).
• “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.”*
(Emphasis added)
2. Comparing to Normative Ethical Theories:

• Normative ethical theories set the norm and tell people what
they should do.
4
3. Relationship between Descriptive Ethical
Theories & “Normative Ethical Theories”
1. Normative Ethical Theories:
• Making moral judgement
E.g. making decision based on consequences, and duties &
rights.
• Little research to show the prevalence of using normative
theories in business place, but some data suggested that
management tends to consider consequences in decision-
making (Premeaux & Mondy, 1993)
E.g.: In GM Case (1970’s), evidence showed that the
company used cost & benefit analysis (to compare the costs
of compensation for potential fatality & replacement of
problematic fuel tanks for a car model. They chose not to fix
the fuel tanks.
*P.124, Crane & Matten (2016) 5
4. Stages in ethical decision-making
1. Four stages in ethical decision-making (Trevino e al.
2006; Craft 2013):
1) To identify a moral issue
2) To make a moral judgement
3) To form a moral intent (e.g. decision in one’s mind)
4) To act according to the moral intent (e.g. to take action
accordingly)
2. Decision-maker may defer to move to the next stage for
various reasons
* P.124, Crane & Matten (2016)

6
5. Understanding (I) individual factors & (II) situational factors
which affect ethical decision-making (in workplace)
I. Individual factors
(1) National and cultural characteristics
(2) Age & gender
(3) Education and employment
(4) Psychological factors (CMD & Locus of Control)
(5) Personal values Preview
II. Situational factors
(6) Personal integrity 1. Issue-related factor
(1) Moral intensity (6 elements)
(2) Moral framing
(7) Whistle blowing
2. Context-related factors
(8) Moral imagination (1) Reward systems
(2) Authority structure
(3) Bureaucracy
(4) Work roles
(5) Group norms
(6) National cultural context
7
• It seems to have significant effect to decision-making
(e.g. different cultures and practices are used in different countries)
• Six dimension (Hostede et al, 2010):
1) Individualism v. collectivism
Culture to emphasize individualism or collectivism
2) Power distance
Power distribution in the hierarchy
3) Uncertainty avoidance
(e.g. willing to take business risk or not)
4) Masculinity v. Femininity
(e.g. emphasis on human relationship or not)
5) Long-term v. short term orientation
Emphasis on long term benefit or short term benefit
(e.g. profit & reputation vs. maximization of profit regardless of others).
6) Indulgence
(e.g. emphasis on strong discipline or not)
8
(2) Age & gender
• Research cannot show a clear association between “age & gender” and
“ethical decision-making”.
(3) Education & Employment (Training & Experience)

• Data cannot clearly show it’s effect on “ethical decision-making”
• But there are some differences between people with different
educations & experience
E.g. Researches showed that business student s are more self-centered
comparing to other students (McCabe et al, 1999)
E.g. In credit crisis, some commentators criticized the “culture of
greed” in banking and financing industry had allegedly poisoned those
people who were working in the field.
* Pp.128 & 131, Crane & Matten (2016)

9
(4) Psychological Factors
• Focus on cognitive process of the decision-maker;
• It can be used to understand how an individual decide what is right or
wrong.
• We look at two psychological theories: (i) Cognitive Moral
Development (CMD) & (ii) Locus of Control
(i) Cognitive Moral Development (CMD), Lawrence Kohlberg (1969).
• It consists of 3 main levels:
1. Pre-conventional level
2. Conventional level
3. Post-conventional level
(Continue)
10
(4) Psychological Factors – (i) CMD:
Level 1 (Pre-conventional level)
• Focus on self-interest)
• Individual concerns with reward and punishment based on self-interest
(E.g. behaviour of a child)
• Decision-making will be affected by the calculation of benefit and harm
based on self-interest.
Level 2 (Conventional level)
• It concerns other people’s expectations and tries to respond accordingly.
• Research has shown that many people adopt this stage of thinking
throughout their business life. (e.g. Employees try to follow the
company’s norm; & a person try to fulfill the expectations of peers.)
Level 3 (Post-conventional level)
• Focus on self-chosen universal ethical principles
• Follow his/her own values, but not expectations of others.
Please further read P.133 of Crane & Matten (2016) for details of the theory! 11
(4) Psychological Factors – (ii) Locus of Control:
• “An individual’s locus of control determines the extent to which
he or she believes that they have control over the events in their
life”[1]
• Trevino & Nelson (2014) suggested[2]:
(1) High internal locus of control
• People believe that they can powerfully influence what is
going on around them.
(2) High external locus of control
• People believe that they are mainly influenced by external
forces, and they cannot change the situations.
• Actions of others who largely determine the outcomes;
• Emphasis of luck, or fate.
[1] P.134, Crane & Matten (2016)
12
[2] Cited by Crane & Matten (2016), P.135
(5) Personal Value:
• It might be regarded as “the moral principles or acceptable
standards of a person”[1]
• A personal value is “an enduring belief that a specific mode of
conduct or end-state of existence is personally or socially
preferable to an opposite mode of conduct or end state”[2]
• Instrumental values
(E.g.: self-control, capability, courage, politeness, honesty, etc.)
• Terminal values
(E.g.: friendship, love, self-respect, happiness, equality, freedom,
etc.)
[1] Collins English Dictionary and Thesaurus (1993), cited by Crane & Matten (2016), p.135
[2] Rokeach (1973:5), cited by Crane & Matten (2016), P.135 13
(6) Personal integrity
• Defined as an adherence to moral principles or values
• Major role in whistle-blowing
• In business context, it normally refers to the situation that an
employee reports or discloses unethical act and/or illegal act
taken place in his/her company or in the activities in association
with his/her company.
(e.g. a staff reports to supervisor that a colleague has stolen
money from the company; reporting to ICAC for bribery cases.)
• Possible steps on whistle-blowing
(e.g.: to convey the concern to a person in authority; to go to a
higher authority (the boss’s boss); or ultimately to report to the
media.)
• It may backfire: Might be fired; treated as trouble-makers; could
be victimized, damaging career prospects/ ‘blacklisted’ in
industry. 14
(7) Moral Imagination
• Concerned with whether one has “a sense of the variety
of possibilities and moral consequences of their
decisions, the ability to imagine a wide range of
possible issues, consequences, and solutions” *
• The imagination of the decision-maker on handling a
ethical business situation.
E.g. What will happen after adopting a large scale lay-off
plan? Different people may have different imaginations on
the outcomes; i.e. causing a strike or minor complaints in
the society.
*Werhane, 1998:76, cited by Crane & Matten (2016), P.140 15

1. Issue-related factor
(1) Moral intensity (6 elements)
(2) Moral framing
2. Context-related factors
(1) Reward systems
(2) Authority structure Review
(3) Bureaucracy
(4) Work roles (2) Age & gender
(3) Education and employment
(5) Group norms (4) Psychological factors
(5) Personal values
(6) National cultural context (6) Personal integrity
(7) Whistle blowing
(8) Moral imagination
16
(1) Moral intensity
• Thomas Jones (1991) suggested that relative importance of an
ethical issue to a decision-maker depends on 6 factors:
1) The magnitude of the consequences;
2) Social consensus;
3) Probability of effect;
4) Temporal immediacy;
5) Proximity; &
6) Concentration of effect.[1]
• The framework is largely based on social psychology.
• Some other authors suggested that the 1st, 2nd and 3rd factors are
more important factor than the 4th, 5th & 5th factors.[2]
• It can be used to estimate psychological stress of decision-maker17
[1] Jones, T.M. (1991); [2] Frey, B. F. (2000), Morris, S. A., & McDonald, R. A. (1995). & Weber, J. (1996).
(1) Moral intensity
1) Magnitude of consequences
• The expected outcomes (i.e. benefits or harms) which can be
caused by the proposed decision.
(E.g. A drugs company is deciding whether to have a clinical
trial on new drugs for curing SARS/serious lung disease on
patients, or not. The side effect of the testing drugs can cause
premature death, the magnitude of consequences is high.)
2) Social consensus
• The degree of acceptance of people on the ethical aspect of the
act.
(E.g. The wider community strongly viewed that the clinical
trial is unethical, the social consensus is high.)
18
(1) Moral intensity
3) Probability of effect
• The likelihood of the outcomes to occur.
(E.g. The side effect of the testing medicine is serious, the
chance of occurrence of the effect appear to be high (i.e. 50%),
the probability of effect raises from medium to high.)
4) Temporal immediacy
• The speed of the outcomes to occur.
(E.g. The trial medicine may cause serious outcome (i.e. pre-
mature death), the side effect will likely to occur after a long
period after consumption (i.e. 50 years later). The temporal
immediacy is low.)
*Jones (1991:374) cited by Crane & Matten (2016), P.140 19

(1) Moral intensity
5) Proximity
• The feeling of closeness (including social, cultural, psychological
and/or physical perspectives, etc.) on those people who can be/
will be affected by outcomes caused by the decision.
(E.g. All the participants of the above clinical trial are unknown and
unrelated to the decision-makers of the drugs company, the proximity
is low.)
6) Concentration of effect
• Whether the outcome is more serious affecting a small number of
people, or the outcome is less serious affecting a large number of
people.
(E.g. If there are 1,000 participants in the clinical trial. The drugs will
cause death (outcome) to 1 of the participants. The concentration of
effect is very high. However, if the side effect is just causing minor
fever to all 1,000 participants, the concentration of effect is low.)20
Issue-related factor
(1) Moral intensity
• From the above example of clinical triad, the intensities of
six components are:
1) The magnitude of the consequences (High)
2) Social consensus (High)
3) Probability of effect (Medium to High)
4) Temporal immediacy (Low)
5) Proximity (Low)
6) Concentration of effect (Low)
• Since components (1) to (3) have greater impact on the
decision-maker(s), the overall moral intensity is HIGH
on the decision-makers who are deciding whether to test
the new medicine, or not. 21
Issue-related factor
(2) Moral Framing
• “The use of language to expose or mask the ethical nature of
certain behaviours or decisions. It is mostly used to make an
unethical action look more acceptable to oneself and/ or third
parties.”*
• Different people with different cultures and backgrounds may
see the same thing in different ways. Language appears to be
important!
(e.g. When someone is looking at a classmate’s homework, the
by-standers may take it as “copying homework” or “having
some basic ideas.)
*P.146, Crane & Matten (2016) 22

(2) Moral Framing
• Moral muteness*
• Many business people (i.e. managers) are reluctant to attach
moral terms to their work, and there are some reasons:
• Harmony
• Manager believes It can disturb harmony in company
• Efficiency
• It can be difficult and time consuming
• Image of power and effectiveness
• It can affect the manager’s power image and effectiveness on
the discussion for ethical issues and topic.
23
* Bird and Waters (1989), as cited by Crane & Matten (2016), p.146.
2. Context related factors
(1) Reward systems
(3) Bureaucracy
(4) Work roles
(5) Group norms
(6) National cultural context
• Each organization has different systems and procedures; it

provides different business contexts and affects the decision-
making process.
.
24
(1) Reward systems
• Motivation of remuneration package (basic salary,
commission, bonus, options on company’s stocks)
(E.g. In performance-related payment system, sales representatives
may temp to depart from some ethical rules to meet sales quota in
order to get more commission.)
• Crane’s (2001) research:
“…[F]ear of marginalization and lack of progress could
influence managers to avoid the explicit moral framing of
problems and issues.”
*P.149, Crane & Matten (2016). 25

Context related factors
• The use of power under the hierarchy of company’s
structure to order/compel a subordinate to do a work
accordingly.
(E.g. a subordinate has no power to decide whether to sale a product
or not. The subordinate is required to do a task as ordered by his/her
manager.)
(3) Bureaucracy
• An organisation with formal structure, power distribution,
departments, divisions, specialization, & standard codes of
conduct, rules and procedures, etc..
*P.150, Crane & Matten (2016) 26

(4) Work roles
• Role roles are the expectations of value, functions, and
behaviour of the staff based according to the job position.*
E.g. the functions and behaviours of a staff in the post of
accountant, marketing manager, & HR etc., in a company.
E.g. When a staff is in company uniform, he/she is representing the
bank with expected behaviours and functions.
(5) Organizational norms and cultures
• “The meanings, beliefs, and common-sense knowledge that are
shared among members of an organization and which as represented
in taken-for-granted assumptions, norms, and values.”*
*Pp.151 & 153, Crane & Matten (2016)

27
(6) National culture
• The culture of a country/ region can affect the organisation
which is operating in that country/ region.
• Different views on right or wrong
E.g. The tradition and religious restriction on consumption of pork
in some countries.
28
Reference
• Jones, T.M. (1991). ‘Ethical decision-making by individuals in
organizations: an issue-contingent model’. Academy of Management
Review 16, pp. 366-395
• Frey, B. F. (2000). The impact of moral intensity on decision making in a
business context. Journal of Business Ethics, 26(3), 181-195;
• Morris, S. A., & McDonald, R. A. (1995). The role of moral intensity in
moral judgments: An empirical investigation. Journal of Business Ethics,
14(9), 715-726;
• Weber, J. (1996). Influences upon managerial moral decision making: Nature
of the harm and magnitude of consequences. Human Relations, 49(1), 1-22.
• Chapter 4, Crane & Matten (2016). Business Ethics: Managing Corporate
Citizenship and Sustainability in the age of Globalization, International
Edition, Oxford University Press, Chapter 4.
• Unit 1, BUS B368, Business Issue and Ethics, Distance Learning Material,
The Open University of Hong Kong.
29

Descriptive Ethical Theories in Business Decision Making

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Making Decisions in Business Ethics

(Descriptive Ethical Theories)

(Revised on 12 Feb. 2019)

2. Normally the decision will involve ethical issue when it is

3. Normally it is likely that:

• “Descriptive business ethics theories seek to describe how

2. Comparing to Normative Ethical Theories:

* P.124, Crane & Matten (2016)

(3) Education & Employment (Training & Experience)

* Pp.128 & 131, Crane & Matten (2016)

*Werhane, 1998:76, cited by Crane & Matten (2016), P.140 15

*Jones (1991:374) cited by Crane & Matten (2016), P.140 19

*P.146, Crane & Matten (2016) 22

• Each organization has different systems and procedures; it

*P.149, Crane & Matten (2016). 25

*P.150, Crane & Matten (2016) 26

*Pp.151 & 153, Crane & Matten (2016)

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