Week 3 ethical decision making

Responsible Ethical Decision-Making

1. How do we make good ethical decisions?

2. Where do we go wrong when we make an ethical decision improperly?

3. Who are managers and businesses responsible to?

The Lost IPad

Responsible Ethical Decision-Making: the Hartman/DesJardins model

Step 1: Determine the facts

Step 2: Identify the ethical issue(s) involved

Step 3: Identify and consider all of the people affected by a decision (“stakeholders”)

Step 4: Consider the available alternatives

Step 5: Compare and weight the alternatives

You should be able to explain, defend, and justify your decision to the entire range of stakeholders involved as something that reflects on who you are and that you are willing to stand behind

Step 6: Make a decision

Step 7: Monitor and learn from the outcomes

Beware these common stumbling blocks

1. Ignorance (though one can be negligent or reckless in one’s ignorance, and one can also choose to be ignorant)

2. Failure to consider non-obvious alternatives

3. Using oversimplified decision rules that are inappropriate in more complex circumstances

4. Settling for an option people can live with, even if it’s not the best option.

5. The path of least resistance may make it easier to do the wrong thing

6. A lack of courage to do what’s right and deal with the consequences

7. Peer pressure / organizational culture distorts our moral perception or reasoning

A short business case…

Sales Expense:

The purchasing manager for a large company agrees to give you an order (their first), expecting you agree to make a $200 donation to his favorite charity, a local youth sports team.

How do you respond?

- Jim Balassone (208)

AWARENESS

• issues• stakeholders

• stakes • options

BALANCE

• Ideals• Obligations

• Utilities

COURAGE

• intention to act• skillful action

Responsible Ethical Decision-Making: the ABC model

AWARENESS

• issues • stakeholders


BALANCE


• Utilities

COURAGE


7

situation context

person

CharacterAffective stateEngagementBiases


AWARENESS



BALANCE


• Utilities

COURAGE


8

situation context

person

Issue intensityObedience to authorityPeer pressureSlippery slopesSunk costs


Situational “Intensity”

1. social consensus – the degree of social agreement that about the moral value (e.g. evil) of a proposed act.

2. magnitude of consequences – the sum of the benefits/harms done to victims/beneficiaries of the moral act in question.

3. concentration of effect – how spread out or concentrated are the harms/benefits of the proposed action.

- Jones, 1991

Certain contextual factors tend to bias our moral intuitions

4. probability of effect – a joint of function of the probability that the act in question will actually take place and that it will actually cause the harms/benefits predicted

5. temporal immediacy – the length of time between the present and the onset of consequences of the moral act in question.

6. proximity – the feeling of nearness (social, cultural, psychological, or physical) that the moral agent has for the victims/beneficiaries of the evil/good act in question.

AWARENESS



BALANCE


• Utilities

COURAGE


situation context

person

LawOrganizational policies and normsProfessional dutiesCulture


situation context

person

AWARENESS



BALANCE


• Utilities

COURAGE

• intention to act

• skillful action

LawOrganizational policies and normsProfessional dutiesCulture

Issue intensityObedience to authorityPeer pressureSlippery slopesSunk costs

CharacterAffective state

metacognition

learning


Individual Ethical Decision-Making in an organizational context

Once in a lifetime trip to the Himalayas. Travel a well used trail

Found a half naked holy man in the snow

Do you take him back to a village? Do you care for him? (Both options would cause you to loose the opportunity to make your once in a life time climb.)

The Parable of the Sadhu

Individual Ethical Decision-Making in an organizational context

by Bowen H. McCoy

QUESTIONS RAISED AUTHOR’S OBSERVATIONS

Is no single person responsible when there is a group?

Do we make decisions based on ethnic considerations?

Can a superordinate goal allow for moral slippage?

Is their an institutional or group ethic strong than an individual ethic?

How much effort is enough to satisfy your moral obligation?

Organizations without a history of mutually accepted shared values tend to come apart during stress.

People in touch with core values can deal with change, ambiguity, stress, and tough times.

People tend avoid the ambiguous yet that is what tends to be the most rewarding

Individuals need organizational support to act morally.

The Parable of the Sadhu

- Jerry Estenson

Shareholders and Stakeholders

What is a business? What are its aims and obligations?

How should we think of a business?

Shareholder view A shareholder mission statement:

Capitalism is primarily a system of competition

Businesses should be managed solely for the benefit of shareholders

Executive benefit often tied to shareholder benefit

Coca-Cola:

We exist to create value for our share owners on a long term basis by building a business that enhances the Coca-Cola company’s trademark. This is also our ultimate commitment.

Freeman’s Criticisms of the Shareholder view

1. Not practical in today’s world

2. Legally out of date

3. Unethical

“Business is a set of relationships among groups which have a stake in the activities that make up the business. Business is about how customers, suppliers employees, financiers, communities and managers interact and create value. To understand a business is to know how these relationships work. And the executive’s or entrepreneur’s job is to manage and shape these relationships…”

- Edward Freeman



Stakeholder view

Capitalism is primarily a system of social cooperation and collaboration

Primary responsibility of executive – create as uch value for stakeholders as possible

No stakeholder interest is viable in isolation of the other stakeholders.

Zappos’ Core Values statement:

1. Deliver WOW Through Service2. Embrace and Drive Change3. Create Fun and A Little

Weirdness4. Be Adventurous, Creative,

and Open-Minded5. Pursue Growth and Learning6. Build Open and Honest

Relationships With Communication

7. Build a Positive Team and Family Spirit

8. Do More With Less9. Be Passionate and

Determined10. Be Humble

Stakeholders & Stakes

Their stake: stocks, bonds, equity, etc.

Expectations: • Return On Investment

(ROI)• Other expectations?

Financiers/Owners


Their stake: • jobs, livelihood, career,

human capital investments

Their expectation:• decent wages,

security, benefits and meaningful work

Employees


Their stake: • need products and

services

Their expectation:• quality products, fair

pricing, and honest dealings.

Customers


Their stake: • need income from

their goods and services

Their expectation:• Expect to be treated

fairly and honestly in a mutually prosperous relationship

Suppliers


Their stake: • the environment,

taxes, payroll, infrastructure improvements

Their expectation:• Provides company with

local resources and in return expects the firm to be a good citizen

Local Community

How do we decide what to do when the interests of stakeholders conflict?

Shareholder view• Do whatever will maximize

shareholder interest

The stakeholder view• Treat all stakeholders

equally?• If not how do you decide

which stakeholder interest gets priority when stakeholder interests conflict?

Milton Friedman

Freeman’s Recommendation

“Where stakeholder interests conflict, the executive must find a way to rethink he problems so that these interests can go together, so have to be made, as often happens in the real world, then the executive must figure out how to make the tradeoffs, and immediately begin improving the tradeoffs for all sides”

Can you serve the long term interests of the shareholders without paying attention to the others?

Why adopt the stakeholder approach?

Utilitarian - It will lead to the best consequences

Business is about collaboration: “The spirit of capitalism is the spirit of individual achievement together with the spirit of accomplishing great tasks in collaboration with others.” (Freeman)

Virtue Ethics - It reflects well on the character and nature of the executive and firm

Deontological - It respects the rights of stakeholders and the duty of the firm to them

Education

Week 3 ethical decision making