Crane and Matten

Business Ethics (3rd Edition)

Chapter 4
Making Decisions in Business Ethics
Descriptive Ethical Theories

Lecture 4
Overview
• Examine the question of why ethical and unethical
decisions get made in the workplace
• Determine what an ethical decision is
• Review prominent ethical decision-making models
• Discuss the importance of differences between
individuals in shaping ethical decision-making
• Critically evaluate the importance of situational
influences on ethical decision-making (issues and
context based)
• Identify points of leverage for managing and
improving ethical decision-making in business
Descriptive Ethical Theories

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.
What is an ethical decision?
Main factors in deciding the moral
status of a situation
• Decision likely to have significant effects on
others
• Decision likely to be characterised by choice,
in that alternative courses of action are open
• Decision is perceived as ethically relevant by
one or more parties
Models of ethical decision-making
Stages in ethical decision-making

Ethical decision-making process

Recognise Make Establish Engage in

moral moral moral moral
issue judgement intent behaviour

Source: Derived from Rest (1986), as cited in Jones (1991).

Relationship with normative theory

The role of normative theory in the stages of

ethical decision-making is primarily in relation to
moral judgement
• Moral judgements can be made according to
considerations of rights, duty, consequences, etc.
• Commercial managers tend to rely on consequentialist
thinking
• However, the issue of whether and how normative theory
is used by an individual decision-maker depends on a
range of different factors that influence the decision-
making process
Influences on ethical decision-making

Two broad categories: individual and situational

(Ford and Richardson 1994)
• Individual factors - unique characteristics of the
individual making the relevant decision
– Given at birth
– Acquired by experience and socialisation
• Situational factors - particular features of the
context that influence whether the individual will make
an ethical or unethical decision
– Work context
– The issue itself including
• Intensity
• ethical framing
Framework for understanding ethical
decision-making
Individual factors

Recognise Make moral Establish Engage in

moral issue judgement moral intent moral
behaviour

Situational factors
Limitations of ethical decision-making
models
• Models useful for structuring discussion and
seeing the different elements that come into play
• Limitations
– Not straightforward or sensible to break model
down into discrete units
– Various stages related or interdependent
– National or cultural bias
• Model is intended not as a definitive
representation of ethical decision-making, but as
a relatively simple way to present a complex
process
International perspectives on ethical
decision-making
• Research on individual factors influencing
ethical decision-making has a strong US and
Asian bias
– Consistent with choice within constraints
• Research on situational factors originated
by European authors
– Consistent with concern for constraints
themselves
Individual influences on ethical decision-
making
Individual influences on ethical decision-making
Age and gender
• Age
– Results contradictory
– However experiences may have impact
• Gender
– Individual characteristic most often researched
– Results contradictory
• These categories too simplistic
National and cultural characteristics
• People from different cultural backgrounds likely
to have different beliefs about right and wrong,
different values, etc. and this will inevitably lead
to variations in ethical decision-making across
nations, religions and cultures
• Hofstede (1980; 1994) influential in shaping our
understanding of these differences – our ‘mental
programming’:
– Individualism/collectivism
– Power distance
– Uncertainty avoidance
– Masculinity/femininity
– Long-term/short-term orientation
Education and employment

• Type and quality of education may be

influential
– E.g. business students rank lower in moral
development than others and more likely to cheat
• ‘Amoral’ business education reinforces myth
of business as amoral
Psychological factors
Cognitive moral development (CMD) refers to
the different levels of reasoning that an individual
can apply to ethical issues and problems
• 3 levels (details over the next two slides)
• Criticisms of CMD
– Gender bias
– Implicit value judgements
– Invariance of stages
An individual’s locus of control determines the
extent to which they believe that they have
control over the events in their life
Stages of cognitive moral
development (I)
Level Stage Explanation Illustration
Individuals define right and Whilst this type of moral reasoning is usually
1 Obedience wrong according to expected associated with small children, we can also
and rewards and punishments from see that businesspeople frequently make
punishment authority figures unethical decisions because they think their
company would either reward it or let it go
unpunished (see Gellerman 1986).
I Preconventional
Instrumental Individuals are concerned with An employee might cover for the absence of
2 purpose and their own immediate interests and a co-worker so that their own absences might
exchange define right according to whether subsequently be covered for in return – a
there is fairness in the exchanges “you scratch my back, I’ll scratch yours”
or deals they make to achieve reciprocity (Treviño and Nelson 1999).
those interests.
Interpersonal Individuals live up to what is An employee might decide that using
3 accord, expected of them by their company resources such as the telephone, the
conformity immediate peers and those close internet and email for personal use whilst at
II Conventional and mutual to them work is acceptable because everyone else in
expectations their office does it.
Individuals’ consideration of the A factory manager may decide to provide
4 Social accord expectations of others broadens to employee benefits and salaries above the
and system social accord more generally, industry minimum in order to ensure that
maintenance rather than just the specific employees receive wages and conditions
people around them. deemed acceptable by consumers, pressure
groups and other social groups.

Source: Adapted from Ferrell et al. (2002); Kohlberg (1969); Trevino and Nelson (1999)
Stages of cognitive moral
development (II)
Level Stage Explanation Illustration

5 Social Individuals go beyond identifying The public affairs manager of a food

contract with others’ expectations, and manufacturer may decide to reveal which of
and assesses right and wrong the firm’s products contain genetically
individual according to the upholding of modified ingredients out of respect for
rights basic rights, values and contracts consumers’ rights to know, even though they
of society. are not obliged to by law, and have not been
III Postconventional pressurised into by consumers or anyone else.

6 Universal Individuals will make decisions A purchasing manager may decide that it
ethical autonomously based on self- would be wrong to continue to buy products
principles chosen universal ethical or ingredients that were tested on animals
principles, such as justice, because he believes this doesn’t respect
equality, and rights, which they animal rights to be free from suffering.
believe everyone should follow.
Personal values, integrity & moral
imagination
Personal values
• ‘an enduring belief that a specific mode of conduct or
end-state of existence is personally or socially preferable
to an opposite or converse mode of conduct or end-
state’ (Rokeach 1973:5)
Personal integrity
• Defined as an adherence to moral principles or values
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” (Werhane, 1998:76)
Situational influences on
decision-making
Situational influences on ethical
decision-making
Type of Factor Influence on ethical decision-making
factor
Moral intensity Reasonably new factor, but evidence suggests significant effect on ethical decision-
Issue-related making.
Moral framing Fairly limited evidence, but existing studies show strong influence on some aspects of
the ethical decision-making process, most notably moral awareness.
Rewards Strong evidence of relationship between rewards/punishments and ethical behaviour,
although other stages in ethical decision-making have been less investigated.
Authority Good general support for a significant influence from immediate superiors and top
management on ethical decision-making of subordinates.

Context- Bureaucracy Significant influence on ethical decision-making well documented, but actually
related exposed to only limited empirical research. Hence, specific consequences for ethical
decision-making remain contested.
Work roles Some influence likely, but lack of empirical evidence to date.

Organizational Strong overall influence, although implications of relationship between culture and
culture ethical decision-making remain contested.

National Context Limited empirical investigation, but some shifts in influence likely.
Moral Intensity
• Jones (1991:374-8) proposes that the intensity of
an issue will vary according to six factors:
– Magnitude of consequences
– Social consensus
– Probability of effect
– Temporal immediacy
– Proximity
– Concentration of effect
Moral framing
• The same problem or dilemma can be perceived
very differently according to the way that the
issue is framed
– Language important aspect of moral framing (using
moral language likely to trigger moral thinking)
• Moral muteness (Bird & Walters 1989) because
of concerns regarding perceived threats to:
– Harmony
– Efficiency
– Image of power and effectiveness
How ethical decisions are justified:
rationalization tactics
Systems of reward

Adherence to ethical principles and standards

stands less chance of being repeated and
spread throughout a company when it goes
unnoticed and unrewarded
• “What is right in the corporation is not what is right in
a man’s home or in his church. What is right in the
corporation is what the guy above you wants from
you. That’s what morality is in the corporation” (Jackall,
1988:6)
Authority and Bureaucracy
Authority Bureaucracy
• Jackall (1988), Bauman
• People do what they are told (1989, 1993) and ten Bos
to do – or what they think (1997) argue bureaucracy
they’re being told to do has a number of negative
• Recent survey of effects on ethical decision-
making
government employees
(Ethics Resource Center, 2008: 9) :
– Suppression of moral
autonomy
– 20% think top leadership is
not held accountable – Instrumental morality
– 25% believe top leadership – Distancing
tolerates retaliation against – Denial of moral status
those reporting ethical
misconduct
– 30% don’t believe their
leaders keep promises
Work roles and organizational norms
and culture
Work roles Organizational
• Work roles can norms and culture
encapsulate a whole set • Group norms delineate
of expectations about acceptable standards of
what to value, how to behaviour within the
relate to others, and work community
how to behave – E.g. ways of talking,
• Can be either functional acting, dressing or
thinking
or hierarchical
National and cultural context

• Instead of looking at the nationality of the

individual making the decision; now we are
considering the nation in which the decision is
actually taking place, regardless of the
decision-maker’s nationality
• Different cultures still to some extent maintain
different views of what is right and wrong
Summary
In this lecture we have:
• Discussed the various stages of and influences on ethical
decision-making in business
• Presented basic model of decision-making
• Outlined individual and situational influences on ethical
decision-making
• Suggested that some individual factors – such as
cognitive moral development, nationality and personal
integrity – are clearly influential
• Suggested that in terms of recognising ethical problems
and actually doing something in response to them, it is
situational factors that appear to be most influential