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Chapter 4
Making Ethical Decisions
CHAPTER OVERVIEW
Too often, ethics is an afterthought in management education. However, ethics is at the core of
what it means to be a good manager. This is not to say that ethical decisions are always clear-cut;
frequently ethical decisions pit us between right-versus-right options or lose-versus-lose options.
This chapter discusses the importance of a personal commitment to ethical behavior, different
ethical theories, and ways to make tough decisions in an ethically conscious and competent way.
LEARNING OBJECTIVES
KNOWING OBJECTIVES
1. Recognize the ethical implications of a problem.
2. Understand the concept of moral intensity.
3. Acquire a basic understanding of ethics and the law.
4. Understand the key differences between ethical perspectives.
5. Articulate the differences between types of organizational justice and how each are
important.
6. Describe different forms of fairness rules and when to apply them in the workplace.
DOING OBJECTIVES
1. Use decision rules to help you solve right-versus-right problems.
2. Identify situations in which moral intensity is influencing a decision.
3. Use the ethical decision-making steps to guide an ethical decision.
4. Use moral imagination and “quick tests” to make tough choices ethically.
5. Demonstrate competence in navigating common ethical situations.
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KEY STUDENT QUESTIONS
Juxtaposing the topic from last chapter (problem-solving) with this chapter (ethics) raises a
number of questions for students, including:
1. “What is more important – solving a problem effectively, or solving it ethically?”
2. “How can I promote a workplace that that encourages problem solving and strong
ethics?”
same.
CHAPTER OUTLINE
I. Introduction
A. Unfortunately, studies show that many managers agree that behaving unethically is
appropriate in some circumstances
B. Approximately two-thirds of students admitted to cheating at least once during college
II. Ethics: Making the Tough Choices
A. Definitions
1. Ethical commitment = a person’s level of dedication or desire to do what is right even
in the face of potentially harmful personal repercussions
solving process
B. Recognizing Ethical Issues
1. Ethics = the principles, norms, and standards that guide group and individual
behavior
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2. Most decisions have ethical implications of some sort
3. Many ethical dilemmas don’t have clearly right and wrong alternatives
a. “Right-versus-right” scenarios are dilemmas with no clear answer
i. Truth versus loyalty dilemmas
iv. Justice versus mercy
b. Moral intensity: the context or situation of how an ethical dilemma is perceived
influences perceptions of the ethics involved
i. Magnitude of consequences
vi. Concentration of effect
c. Ethics and the law
i. Ethical norms and legal norms are not identical and do not always agree
ii. Five important reasons the law may not align with ethics
a.) The law changes slowly (consider that slavery used to be legal in the U.S.)
b.) Societies that value individual freedoms are reluctant to legislate more
than the ethical minimum
e.) The idea that compliance is enough relies on a misleading understanding
of the law
III. Six Steps to Making an Ethical Decision
A. Step 1: Gather the Facts
1. Sometimes the cause of the ethical dilemma is a lack of facts or when your “facts” are
incongruent with someone else’s “facts”
2. Gathering evidence and giving careful consideration to facts is a precondition for an
ethical decision
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B. Step 2: Define the Ethical Issues
1. Ethical theories are attempts to provide systematic answers to ethical dilemmas
2. Teleological theories determine the ethics of an act by looking to the probable
outcome
a. Cost-benefit analysis is a form of how utilitarianism is applied in business
b. Pros of utilitarianism
i. Easy to understand
ii. Intuitive
iii. Helps people to focus on outcomes of decisions
c. Cons of utilitarianism
i. Difficult to measure “good”
ii. What if good outcomes of the majority infringe on the rights of a minority?
5. Universalism = a deontological perspective that considers whether a decision would
be acceptable if everyone in every situation made the same decision
a. Philosopher Immanuel Kant proposed the perspective
beings
b. Golden Rule: treat others as you would like to be treated
6. Virtue Ethics = identifies the values, interests, and motivations of a person with
integrity and virtue
a. When facing an ethical dilemma, one might ask “what would a virtuous person do
in this situation?”
b. Kohlberg’s research on moral reasoning
i. People develop moral reasoning capabilities from childhood into adulthood
ii. Few adults reach the highest level of moral reasoning
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C. Step 3: Identify the Affected Parties, Consequences, and Obligations
1. Identify stakeholders
in an indirect way
2. Exercise “perspective–taking” of stakeholders
3. Consider the likely consequences of the decision and how it will affect the
stakeholders
4. Consider your obligations to the different stakeholders
D. Step 4: Consider your Integrity
1. Beware of the most common rationalizations used to justify unethical behavior
a. If it’s legal, it’s ethical.
2. According to Johnson, there are 3 factors that disrupt moral reasoning
a. Insecurities
b. Greed
c. Ego
3. According to Moberg, good people can inadvertently do bad things in certain
circumstances
4. Questions managers should ask themselves before making tough choices:
a. Is my action legal?
b. Am I behaving fairly?
c. Is my decision in line with my own values?
d. Will others be negatively impacted?
5. Whistle-blowing = bringing wrong-doing to the attention of people who have the
power to make changes
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E. Step 5: Think Creatively about Actions
1. Trilemma: Instead of thinking “either–or” consider a third way forward, a middle
ground between two seemingly implacable alternatives
2. Moral imagination: The ability to:
c. Evaluate new possibilities from an ethical perspective
F. Step 6: Check your Instincts
1. Test your decision against these tests:
a. Wall Street Journal Test:
i. Would I stand by my actions if they were published on the front page of the
Wall Street Journal?
b. Platinum Rule Test:
i. Am I treating others the way they would want to be treated?
c. The Mom Test:
i. Would I be proud to tell my mother of my decision?
d. The Personal Gain Test:
i. Is the opportunity to gain personally standing in the way of my thinking?
e. The Cost-Benefit Test:
i. Does my decision benefit some to the detriment of others?
IV. Fairness in the Workplace
A. Economics – People perceive supply and demand decisions differently.
1. Equality – People see 50-50 splits as equal, but don’t take starting points into
consideration.
2. Justice – Justice perceptions are at the heart of many ethical issues
V. Managing Justice Perceptions
A. Distributive Justice – Are outcomes perceived as fair?
1. Equity: When rewards are distributed according to people’s contributions
2. Equality: When rewards are distributed equally to everyone regardless of contribution
3. Need: When rewards are distributed according to how much different people need
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B. Procedural Justice – Is the process used to determine the outcome perceived as fair?
1. People are more favorable of their own negative outcomes when procedural justice is
high
C. Interactional Justice – Have people treated others fairly and explained their processes
fully?
VI. Navigating Common Managerial Ethical Situations
A. Work Assignments and Opportunities
1. Give careful consideration in assigning tasks and opportunities so that the
assignments are perceived as fair
2. Do not assume that people will see assignments as equitably distributed
B. Performance Evaluation
3. Give employees a “voice” in their evaluation to increase fairness perceptions
C. Punishment and Discipline
1. Try to avoid punishment unless necessary
2. Some situations necessitate punishment:
a. Examples: Major safety violations, legal infractions, theft
3. Tips for fairness in punishment:
a. Communicate a clear message to employees about what behaviors will result in
discipline
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b. When an employee engages in such behaviors, the manager must follow through
with disciplinary action
D. Harassment
1. All complaints of harassment must be taken seriously
2. Individual managers can be held liable if they allow harassment in their work group
3. Harassment has toxic effects for not just the harassed employee, but other employees
as well
E. Family and Personal Issues
1. Work-family conflict can cause burnout, job dissatisfaction, and health problems
2. Tips for Managers
c. Make clear that accommodations are not “free passes” to not do the work
CASES
Truthy
Suggested answers to Case questions in chapter:
1. Social media is a powerful tool. Unfortunately, it can contribute to unethical behavior for
a number of reasons. First, social media can be written and spread anonymously. If
are dictated by the journalism profession.
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2. Answers will vary. Some students might cite marketing campaigns promoted through
social media that are seen to be taking advantage of people. Other students might observe
been blamed for contributing to teen suicides in several instances.
3. Although the internet in general is open and uncensored, this does not mean that
ways to circumvent such techniques.
“MANAGE WHAT” SCENARIOS
1. Making a Difficult Ethical Choice
Debrief is in the text at the end of the chapter.
2. You be the Ethicist
Debrief is in the text at the end of the chapter.
3. Creating a Culture that People View as Fair
This Manage What Scenario deals with a problem that is highly relevant in the current economy
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As a manager, you are wise to be concerned with justice perceptions. Research shows that low
distributive and procedural justice perceptions are associated with a host of negative outcomes:
perceptions.
One thing to keep in mind is the research on the “fair process effect” which is the tendency for
people to be more tolerant of their own negative outcomes when they perceive that the process
made up after the fact.
Leventhal (1980) identified six other factors that contribute to fairness perceptions. Leventhal’s
Six Attributes of Fair Procedures
◼ Consistent
◼ Bias Suppression
◼ Based on prevailing ethical standards
Citation:
Leventhal, G.S. (1980). What should be done with equity theory? In K.J. Gergen, M.S.
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4. Being a Responsible Whistle-Blower
Debrief is in the text at the end of the chapter.
MANAGEMENT LIVE
4.1 The Biology of Ethical Decision Making
This Management Live reports on a study that showed that people with higher testosterone are
more likely to be “intransigent utilitarians” – meaning that they always endorsed the greater good
to believe that their decisions in an ethical dilemma are purely logical and “correct” but we are
not always aware of the things that influence our decisions, including our biology.
Class discussion questions:
1. If biological factors like testosterone contribute to our ethical decision-making, then can
we truly hold people accountable for those decisions? Why or why not?
2. Men typically have higher testosterone levels than women. Because men are more likely
than women to be in high level positions (e.g., politics, CEO), do you think there might
be an over-representation of intransigent utilitarians in high-power positions? Explain
your answer. Also, if this IS true, what are the possible implications?
3. What other individual differences might impact our decision-making either consciously
or unconsciously?
4.2 Moral Imagination at American Airlines
This Management Live discusses creative suggestions made by American Airline employees
that ultimately saved the company $4 billion annually.
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Class discussion questions:
1. Is it ethical for top executives to cut salary and benefits for most workers but to give
themselves raises? Why or why not?
2. Is it ethical for executives to cut salary and benefits if savings can be achieved in other
ways? Why or why not?
3. Describe an ethical problem facing you personally or society in general. Then try to
exercise moral imagination to view the problem in a different way and come up with
alternative ways to address the problem. For example, consider the problem of pollution
caused by agriculture. How can you exercise moral imagination to redefine the problem
and create possible solutions?
4.3 Downsizing: Competitive Strategy or Decision-Making Malpractice?
This Management Live will likely resonate with many students who have witnessed problems of
friends and family members who have been laid off or are layoff survivors.
The instructor can ask students to interview someone they know who has been impacted by a
layoff. If they do not know someone who has experienced a layoff, they can do online research
about a company that went through layoffs. Through their research or interviews students should
answer the following questions:
1) What are the ethical implications of a layoff?
2) Who are the primary stakeholders and how were they each impacted by the layoff? Were
the long-term consequences different from the short-term consequences?
3) Were there any unexpected consequences that came as a result of the layoff?
4) Why do you think companies continue to use layoffs when the research shows they are
not effective? Is it ethical for companies to engage in actions that are not supported by
research? Explain your answer.
4.4 The Ethics of Executive Compensation
This Management Live discusses the pay gap between the top earners and average earners in
U.S. companies. Instructors might consider holding a class debate about the ethics of executive
deontological perspective applying the categorical imperative. A third group will analyze the
topic using virtue theory. All groups should present their arguments in front of the class.
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TOOL KITS
4.1- Affected Parties, Consequences, and Obligations
This tool kit shows a systematic analysis of how ethical decisions can impact others.
Specifically, the tool kit includes a table showing the primary stakeholders who would be
impacted by a decision, the potential consequences of the decision, the decision–maker’s
one they have faced in the recent past. Students should then create a table like the one in the tool
kit. Then, using the information in the table they should discuss their ultimate decision (and the
outcomes if it happened in the past.
4.2- The Last Resort: How to Blow the Whistle on Unethical Behavior
This tool kit presents a logical process that guides a person through the decision of whether to
blow the whistle on unethical behavior. In most cases, blowing the whistle should not be the first
step someone takes when they witness what they believe is unethical behavior. First, they should
investigate the issue further and see if the situation can be addressed. It is possible that the
witness has misinterpreted the situation and no wrongdoing actually occurred. Or, the situation
may have been an innocent mistake rather than intentional wrongdoing. For example, perhaps an
incorrect financial record is due to an employee’s careless mistake rather than intentional
falsification. In such case, merely mentioning the mistake to the employee should bring a simple
resolution to the problem. If, however, the situation cannot be resolved after further
investigation, the witness may be ethically obligated to blow the whistle to someone who can
stop the unethical behavior.
Students should review the tool kit before answering the following discussion questions.
1. List the primary reasons you think people do not blow the whistle on unethical behavior.
2. If you witnessed unethical behavior in an organization, what steps might you take prior to
blowing the whistle? What factors would influence whether or not you decided to blow
the whistle?
Chapter 04 – Making Ethical Decisions
3. Imagine that you are an employee who works at a local computer and electronics store.
Recently you heard the owner of the store talking on the phone and the conversation
bothered you. Apparently, the store owner donated $8,000 in computers and electronics
to a non-profit organization that provides after-school programs to underprivileged
children. However, the owner declared the value of the donations at $20,000 on tax
statements. Is this wrong? Why or why not? Imagine that you confronted the owner but
the owner told you to stay out of it and not tell anyone. What would you do in this
4.3 Methods for Increasing Procedural Justice
This tool kit shows several evidence-based strategies for improving perceptions of procedural
justice. Justice perceptions are incredibly important. Employees who have low perceptions of
system to the actions listed in the tool kit. Students should read the tool kit. Then instructors can
read the following instructions and questions to students.
The U.S. justice system includes many provisions to help ensure that justice is served,
namely that those guilty of crimes will be punished appropriately while those who are
innocent will be free of damages.
1. What are some of the basic principles of the U.S. justice system that help to ensure
2. How does the U.S. legal system allow for participation and “voice” in the decision–
making in the process?
3. Are the rules of justice applied consistently in our legal system? Explain your answer.
4. Is there a process for appeals and correction of inaccurate information built into our
justice system? Explain your answer.
5. Do you think that personal biases enter into the U.S. justice system? Why or why not?
What are ways to suppress bias from influencing decisions?