CHAPTER 5
Ethical Decision Making
SUMMARY
This chapter summarizes our current knowledge of ethical decision making in business and
provides a model so you may better visualize the ethical decision making process. Although it is
impossible to describe exactly how any one individual or work group might make ethical decisions,
we can offer generalizations about average or typical behavior patterns within organizations. These
generalizations are based on many studies and at least six ethical decision models that have been
widely accepted by academics and practitioners. Based on this research, we present a model for
understanding ethical decision making in the context of business organizations. The model
INSTRUCTOR NOTES FOR “AN ETHICAL DILEMMA”
The ethical issue in this case has to do with how Steven can confront the unethical behavior occurring
within the restaurant. At first, staff just goofed off instead of cleaning up their work areas like they were
supposed to do. However, this behavior progressed until staff were ignoring proper sanitation (serving
food that had landed on the floor, not washing their hands between handling meat and vegetables, and
not washing utensils between uses). This behavior escalates into someone leaving the walk-in freezer
open and allowing meat to rot. There are ethical policies instructing employees on how to properly
LECTURE OUTLINE
I. A Framework for Ethical Decision Making in Business
A. This model of the ethical decision-making process in business includes ethical issue
intensity, individual factors, and organizational factors such as corporate culture and
Chapter 5: Ethical Decision Making and Ethical Leadership 27
opportunity. All of these interrelated factors influence the evaluations of and intentions
behind the decisions that produce ethical or unethical behavior.
B. Ethical Issue Intensity
1. The first step in ethical decision making is to recognize that an ethical issue requires an
3. Ethical issue intensity can be defined as the relevance or importance of an event or decision
4. Individuals are subject to six “spheres of influence” when confronted with ethical choices—
the workplace, family, religion, legal system, community, and profession—and the level of
importance of each of these influences will vary depending on how important the decision
5. Moral intensity relates to a person’s perception of social pressure and the harm the decision
will have on others.
C. Individual Factors
1. People often base their decisions regarding ethical issues on their own values and principles
of right or wrong. These values are subjective and can vary across cultures.
2. Research on gender and ethical decision making shows that in many aspects there is no
3. Education and work experience are both positively correlated with making ethical
decisions.
4. Nationality is the legal relationship between a person and the country in which he/she is
born. Culture differences may contribute to differing value systems.
6. Locus of control relates to individual differences in relation to a generalized belief about
how one is affected by internal versus external events or reinforcements.
a. Those who believe in external control (externals) see themselves as going with the
28 Chapter 5: Ethical Decision Making and Ethical Leadership
c. While we still cannot be certain how significant locus of control is in terms of
ethical decision making, one study found that internals were positively correlated
to ethical decision making while externals were negatively correlated.
D. Organizational Factors
1. No one operates in a vacuum.
2. In the workplace, the organization’s values have the greatest influence on decisions.
4. The ethical culture is a function of many factors, including corporate policies on
ethics, top management’s leadership on ethical issues, the influence of coworkers, and
5. Those who have influence in a work group, including peers, managers, coworkers, and
subordinates, are referred to as significant others.
6. Obedience to authority helps to explain why many employees resolve business ethics
issues by simply following the directives of a superior. In organizations that emphasize
respect for superiors, employees may feel that they are expected to carry out all orders
from a supervisor.
E. Opportunity
2. It results from conditions that either provide rewards or fail to erect barriers against
unethical behavior.
4. The opportunity that employees have for unethical behavior in an organization can
be greatly reduced through formal codes, policies, and rules that are adequately
1. An individual’s intentions and the final decision regarding what action he or she will
take are the last steps in the ethical decision-making process.
3. The road to success depends upon how that person defines success.
II. Using the Ethical Decision-Making Model to Improve Ethical Decisions
A. The ethical decision making framework cannot tell you if a business decision is ethical or
unethical, but it does provide you with insights and knowledge about typical ethical decision
B. It is unlikely that an organization’s ethical problems will be solved through a thorough
knowledge about how ethical decisions are made.
1. Business ethics involves value judgments and collective agreement about acceptable
patterns of behavior.
1. Organizations take on a culture of their own, which, when combined with corporate
governance mechanisms, have a significant influence on business ethics.
III. Normative Considerations in Ethical Decision Making
A. Normative approaches concern how organizational decision makers should approach an issue.
1. It differs from a descriptive approach, which examines how organizational decision makers
approach ethical decision making.
3. Most organizations develop a set of core values to provide enduring beliefs about
4. By incorporating stakeholder objectives into corporate core values, companies begin to view
stakeholders as significant.
B. Institutions as the Foundation for Normative Values
1. Institutions are important in establishing a foundation for normative values.
2. Organizations face certain normative pressures from different institutions to act a certain
way.
a. These pressures can take place internally (inside the organization itself) and/or
externally (from the government or other institutions).
3. These institutions can be sorted into three categories: political, economic, and social.
a. Political institutions influence the development of values as organizations must comply
with these types of institutional norms and belief systems to succeed.
i) Political influences can also take place within the organization.
ii) An ethical organization has policies and rules in place to determine appropriate
the good of the firm. The amount of competition in an industry can be determined and
described according to the following:
i) Barriers to entry into the industry.
ii) Available substitutes for the products produced by the industry rivals.
iii) The power of the industry rivals over their customers.
e. An organization uses rules dictated by its institutionalized environment to
measure the appropriateness of behavior.
i) Organizations facing the same environmental norms or rules become
isomorphic, or institutionalized.
f. While industry shared values promote organizational effectiveness when linked to
C. Implementing Principles and Core Values in Ethical Decision Making
1. Political, economic, and social institutions help organizations determine principles and
2. John Rawls was one of the most influential philosophers in his research on how
principles support the concept of justice.
a. The veil of ignorance is a thought experiment that examined how individuals
3. Companies take basic principles and translate them into core values.
a. Core values provide the abstract ideals that are distinct from individual values and
4. Leaders, stakeholders, and the organizational culture impact the development of core
values.
a. 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.
IV. Understanding Ethical Decision Making in Leadership
A. Ethical issue intensity, individual factors, organizational factors, and opportunity are all
factors that result in business ethics evaluations and decisions.
B. An ethical organizational culture is shaped by effective leadership.
1. Without top level support for ethical behavior, the opportunity for employees to engage in
their own personal approach to ethical decision making will evolve.
C. The more you know about ethical decision making in business, the more likely you will be to
make good decisions.
DEBATE ISSUE: TAKE A STAND
Have your students split into two teams. One team will argue for the first point, and the other will argue
for the opposing view. The purpose is to get students to realize that there are no easy answers to many
of these issues. This issue involves whether companies should have the right to track employees’
“RESOLVING ETHICAL BUSINESS CHALLENGES” NOTES
In this case, the board of directors for CrudeOil has brought in a new manager, Jim, to revamp the
company and increase sales. Jim’s confrontational and intimidating management style causes many
employees to take his abuse silently out of fear of losing their jobs or being demoted. Jim’s behavior is