Part Three The Decision Making Process Chapter Ethical Decision Making © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 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, 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, 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, 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, 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, Individual Factors An organization may intend to 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, 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, Locus of Control Managers with… External locus of control go with the flow because that’s all they can 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, 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 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 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 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 Implementing Principles and Core Values in Ethical Decision Making John Rawls was one of the most influential philosophers in his research on how principles support the concept of justice Veil of ignorance: A thought experiment that examined how individuals would formulate principles if they did not know what their future position in society would be Identified principles that were not biased by one’s social position © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 26 Implementing Principles and Core Values in Ethical Decision Making Two main principles of justice… Liberty principle (equality principle): States that each person has basic rights that are compatible to the basic liberties of others Difference principle: States that economic and social equalities (or inequalities) should be arranged to provide the most benefit to the least-advantaged members of society Does not advocate for the complete elimination of inequalities in society The most ethical decision seeks to benefit and not harm disadvantaged populations © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 27 Implementing Principles and Core Values in Ethical Decision Making Companies take basic principles and translate them into core values Core values provide the abstract ideals that are distinct from individual values and daily operational procedures Value practices evolve and are translated into normative definitions of ethical or unethical Individual and organizational values can differ significantly because of ethical diversity among individuals © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 28 Implementing Principles and Core Values in Ethical Decision Making Leaders, stakeholders, and the organizational culture impact the development of core values A firm’s core values provide a blueprint into the firm’s purpose as well as how it views ethical decision making and prioritizes stakeholders Organizations that have ethics programs based on a values orientation are found to make a greater contribution than those based simply on compliance © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 29 Principles and Values © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 30 Core Values of Marriott Put People First Pursue Excellence Embrace Change Act with Integrity Serve Our World Source: Marriott, 2011 Annual Report, http://investor.shareholder com/mar/marriottAR11/index.html (accessed April 19, 2013) © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 31 Understanding Ethical Decision Making Ethical issue intensity, individual factors, and opportunity result in business ethics evaluations and decisions An organizational ethical culture is shaped by effective leadership Top level support is required for ethical behavior An ethical corporate culture needs shared values and proper oversight The more you know about ethical decision making, the more likely you will be to make good decisions © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 32 [...]... mistakes © 20 15 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... 2013) © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 31 Understanding Ethical Decision Making Ethical issue intensity, individual factors, and opportunity result in business ethics evaluations and decisions An organizational ethical culture is shaped by effective leadership Top level support is required for ethical behavior An ethical. .. 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 © 20 15 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. .. 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 © 20 15 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... the complete elimination of inequalities in society The most ethical decision seeks to benefit and not harm disadvantaged populations © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 27 Implementing Principles and Core Values in Ethical Decision Making Companies take basic principles and translate them into core values Core values provide... values and daily operational procedures Value practices evolve and are translated into normative definitions of ethical or unethical Individual and organizational values can differ significantly because of ethical diversity among individuals © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 28 Implementing Principles and Core Values in Ethical. .. 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. .. part, 28 Implementing Principles and Core Values in Ethical Decision Making Leaders, stakeholders, and the organizational culture impact the development of core values A firm’s core values provide a blueprint into the firm’s purpose as well as how it views ethical decision making and prioritizes stakeholders Organizations that have ethics programs based on a values orientation are found to make... 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 © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 21 Institutions as the Foundation for Normative... position © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, 26 Implementing Principles and Core Values in Ethical Decision Making Two main principles of justice… Liberty principle (equality principle): States that each person has basic rights that are compatible to the basic liberties of others Difference principle: States that economic and social ... 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. .. to ethical decision making © 20 15 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, Framework for Understanding Ethical Decision Making in Business. .. 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