Ethical models in business management:

How to make ethical decisions in a

workplace.
Introduction
Basic concepts:
 What are ethical models?
 What is business ethics?

3 Types of ethical frameworks

 Utilitarianism.
 Rights and duties.
 Virtue ethics.
The Importance of business ethics
How to make ethical decisions in management
Ethical theories in business
 The stockholder theory
 The stakeholder theory
 The social contract theory
Conclusion
Introduction
In nearly all cases, employing ethical models in business management is in a company’s best
interest.

Ethical models helps in retaining good staff as well as loyal customers. Customer most times, feel
that by supporting ethically minded corporations, they themselves are making ethical choices.

This article breaks down the ethical models and how to use them in business management.

You will additionally learn:

- 3 Types of Ethical Frameworks

- Importance of Business Ethics
- How to make ethical decisions in Management
- Ethical theories in business

Let’s get started.

Basic concepts
 What are ethical models?
Markkula Centre for Applied Ethics phrased ethical models on a standard of right and wrong that
serves as a basis on which humans should act, whichthis can be in terms of fairness, obligations,
benefits to the society, rights, or specific values.

Ethics is not identical to faith, feelings, following the law or social expectations. Rather, ethics
encompasses:

 Refraining from wrong actions, like larceny, murder or fraud.

 Human rights, like the right to life and also the right to privacy.
 Virtues, like honesty, compassion and loyalty.

Organizations are to adopt tips that promotes ethical values; and make I as a priority to staff.

 What is business ethics?

A general definition of business ethics is that it is a tool a company uses to ensure positivity from
managers, employees, and senior leadership making them act responsibly within and outside the
business with internal and external stakeholders.

3 Types of Ethical Frameworks

 Utilitarianism.
Under the utilitarianism ethical model, an organization ought to make decisions only after
considering all potential consequences associated with that decision. Utilitarianism is said to be a
kind of consequentialism, a philosophy that holds that an action’s morality is decided by its
consequences. Once utilitarianism is applied to a business call, there are absolutely no right or
wrong selections. Rather, the right decision is the one that points to most profit and also the least
impairment.

 Rights and duties.

The rights and duties ethical model, rests on the thought that individual people and teams have
rights and the corporation has the duty to respect those rights.

For instance, when developing a parental leave policy, an organization would possibly confirm that
every new parent has the right to spend a sufficient quantity of your time with their new born. The
business, recognizing its duty to respect and defend this right, determines a reasonable amount of
paid leave time to give new parents.

 Virtue ethics.
Under this ethical model, business behaviour is driven by asking, “What would a virtuous
business/person do?” A business leader can make a decision, by referring back to a certain set down
guideline already created by the business, then the individual to make the decision will check to see
if it tallies with virtuous adjectives like:

 Kind.
 Helpful.
 Responsible.
 Compassionate.
 Progressive.
 Fair.

A manager facing the choice to probably terminate a worker perhaps due to his personal social
media posts would possibly apply the virtue ethics model by understanding whether or not
terminating the job of the worker showsis truthfulness, accountabilityle or compassionate.

This will be a tough call, as firing the worker probably wouldn't be compassionate to him, however it
may well be the truthful, accountable selection for the company as a whole.

The manager at this point would possibly have to rely on another moral framework like utilitarianism
to help him/her make a final choice.

The Importance of Business Ethics

Making ethical decisions in business is quite necessary for developing a positive public image for an
organization. It can helpfacilitate the company toin avoiding lawsuits and also the potential
consequences associated with them, like fines and negative media coverage.
Committing to few ethical decisions, like solely operating with vendors that pay their staff fair wages,
also can improve workers’ lives round the world.

When making a moral call, an organization leader has to think beyond the decision’s immediate
repercussions and take into account all of his decision’s potential outcomes.

Many corporations are realizing the importance of code of ethics development and are working to
make codes of ethics accordingly. The aim of code of ethics development and resultant ethics
coaching is to outline a company’s moral stances on topics like material sourcing, conflict resolution
and legal compliance, so to make sure that each member of the corporation understands the ethics
code.

The benefits of getting a code of ethics embodies protective employees’ rights, avoiding legal
challenges and developing a positive public image of the corporate.

Here are other benefits of ethical code:

It Protects Employees’ Rights

A primary purpose of code of ethics coaching is to make sure that managers have an understanding
of staff’s legal rights and employees know how to advocate for themselves in scenarios like:

 Pay disputes
 Discrimination
 Sexual harassment
 Disparate treatment
 Resolving conflicts
 Pursuing promotions

Following an ethical code concerning worker treatment can defend staff from being exploited and
mistreated in different other ways. Educating staff regarding their rights and the way to advocate for
themselves is another advantage of getting a code of ethics, as empowering staff to be their own
advocates can serve them throughout the rest of their careers.

Ethics Make Difficult Choices Easier

A code of ethics can make the decision-making process in a business easier. The daily task of making
decisions as a supervisor or an organisational leader and business operation is not an easy task.
Having a code of ethics can make this so much easier and smoother.

Having a well-developed code of ethics makes it easier for company leaders to develop a good code
of conduct for workers. A code of conduct is not equivalent to a code of ethics,. whereas a code of
ethics states the company’s broad positions, a code of conduct is a definite set of directions that
team members are expected to follow while employed by the company. Generally, the code of
conduct is written using the positions made public within the code of ethics, and its directions are
developed to aid staff to follow the company’s code of ethics.

Building a positive image

Another vital advantage of getting a code of ethics is making a positive public image. Customers pay
attention to companies’ actions, notably those involving moral choices. Typically, shoppers like
supporting corporations they understand to be moral and will pay more for merchandise and
services from these corporations.

It can stop Lawsuits and Legal Challenges

The importance of code of ethics development is straight away apparent once other corporations
within the same trade face lawsuits for moral and legal violations. By developing a powerful code of
ethics and prioritizing its tenets in each business call, thea company’s leaders will probably save the
corporate lots of money within the legal fees and fines that may accompany an allegation of
wrongdoing.

Creating a positive rapport with the general public

News of moral violations reaches social media and different public retailers quickly, and even a little
infraction may have a devastating result on the public’s perception of a brand. By committing itself
to the importance of its code of ethics in each action it takes, an organization can prevent itself
against all the consequences of negative publicity.

Here are some examples of moral problems within the workplace.

A few samples of moral problems within the work place that may arise includes:

 Environmental sustainability.
 Transparent internal and external communication.
 Respect for human rights.
 Fair wages for workers and vendors.
 Complying with government agency work standards.
 Fair treatment of staff and contracted employees.
 Compliance with trade rules.
 Compliance with state and federal laws.

How to make ethical decisions in Management

It is usually the responsibility of managers to make different business decisions for a company.
Individuals who are usually affected are either internal or external stakeholders. A big part of
management’s responsibility is making decisions to act ethically. Business ethics usually involves
following moral or ethical principles outlined by society. It is necessary for corporations to
internalize these principles, so managers have a framework for ethical decisions. This framework —
often referred to as a code of ethics — provides managers with a blueprint for making decisions
based on ethics.

Here are some ways to make ethical decisions in business management:

Create and make managers implement a written code of ethics to follow

The moral principles contained within the code may be descriptive or normative. A descriptive code
needs managers to question what individuals suppose is correct and follow that pattern once making
decisions. Normative ethics uses the ethics from society to assist managers make decisions by
specializing on the end result.

Follow trade tips when making ethical choices

Government agencies most times regulate a bunch of business industries. Mining, health care,
producing and money services all have strict rules. Corporations can mirror their code of ethics
against the rules or legal boundaries created by government agencies. This likely ends up in the
equitable treatment of all business stakeholders.

Involve many diverse people within the decision-making method

Ethics and moral views are most times totally different from those operating in a company. Having
diverse people involved in your decision-making process can offer a lot of insight to the direction of a
company’s activities. Every individual can represent a unique cluster of stakeholders in the company.

Ethical Theories in Business

In a trial to determine some ethical tips for business, 3 normative ethical theories have evolved in
Western capitalist societies and they include the following:

The Stockholder Theory

The stockholder theory states that increasing profits is solely the goal of a business.

The stockholder theory asserts that the investors in a business basically run the show. They advance
capital to their managers, who then make decisions completely for the sake of making more wealth.
The stockholder theory has no concern with for social responsibility. Increasing the income on
investment is solely the goal of the business. It supports a utilitarian theory that ensures optimum
gain more than anything else.

The Stakeholder Theory

The stakeholder theory holds that a business ought to take into thought the requirements and needs
of its customers, suppliers, owners and workers.

Although, the major goal of this model is to maximise the firm’s monetary value too, the idea holds
that the interests of the stockholders should sometimes be sacrificed in a bid to confirm a company’s
survival. The stakeholder theory relies on Immanuel Kant’s philosophy that each person is to be
treated with respect and thoughtfulness and also allowed to participate by voicing their opinions as
equal partners.
The Social Contract Theory
This states that maintaining the morale of workers will boost the wealth of a business.

John Hasnas says the most widely accepted business theory is the social contract theory, supported
by the philosophies of 18th-century political thinkers like philosopher and John Locke, who tried
imagining what the planet would be like without government.

This theory claims that each business ought to be dedicated to improving the interests of humanity
wholly, by functioning such that it considers the well-being of customers and employees--not
stockholders only--without violating any rules of integrity.

In this theory, a business should perform an obligation to "social welfare and justice." Although the
social contract theory isn't thought of as an actual contract, it holds business ventures to high
standards by "imposing important social responsibilities, according to Hasnas in his 1998 article,
"The Normative Theories of Business Ethics: A Guide for the perplexed."

Conclusion
Taking the stance to include ethical models in your business can only yield goodness, as there are
benefits to it, like you now know.

Not only can it save you more money and bring more customers your way, ethical models in
business management areis a standards of business management every small business owner should
emulate.