Ethical Decision-Making: Personal

and Professional Contexts

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 Chapter Objectives
 After exploring this chapter, you will be able to:
1. Describe a process for ethically responsible decision-making
2. Apply this model to ethical decision points.
3. Explain the reasons why “good” people might engage in
unethical behavior
4. Explore the impact of managerial roles on the nature of our
decision-making.

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 CASE Analysis

 Summarize the facts of the case.

 State the central ethical issue(s).

 Develop an ethical analysis of the case.

 Conclude by summarizing your answers to

the central ethical issues.

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 CASE Analysis
 Develop an ethical analysis of the case.
 Identify available options.
 Apply ethical ideas and principles to evaluate the
options and select (and defend) the one that is best.
• Use Freeman’s stakeholder approach to the analysis, but
indicate the difference(s) there would be if you used
Friedman’s shareholder approach.
• Use ethical theories – Kant, Utilitarianism.
• Use other ideas and principles from the course readings as
appropriate.
 If the actual outcome of the case is known, compare
it to the option selected.
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 Merck Case − Facts

 River blindness was a wide-spread problem in poor

countries, and it had no effective treatment.
 Scientists at Merck accidentally discovered that an anti-
parasite drug for animals was effective against a parasite
similar to the one that causes river blindness in humans.
 Developing and testing a human version of the drug
would cost a large amount of money.
 The target countries could not afford the drug if it was
developed.
 Merck had a tradition and culture of placing people
before profits.

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 Merck Case – Central Ethical Issue

 Should Merck spend money to develop a drug that will

 reduce the suffering and prolong the lives of millions
of poor people in third world countries, but
 for which there is little prospect for recovering their
costs and making a profit?

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 Merck Case − Options
 Develop the drug,
 Either at a loss, or
 Subsidized by profits from other Merck products, e.g.,
the animal version of the drug.
 Forget the drug.
 Turn the preliminary findings over to the World
Health Organization or some other UN agency
that could then fund it through charitable
contributions to the UN.
 Other?
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 Merck Case − Stakeholders
 Merck shareholders who generally want
growth in stock value and/or dividends.
 All of the people who would be saved from
river blindness.
 World-wide humanitarian agencies that have
tried to bring relief to river blindness victims.
 The countries in which river blindness occurs.
 Others?

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 Merck Case − Friedman’s View

 At first glance, it seems Friedman would say no.

 Profit motives would appear to favor forgetting about
the human version of the drug.
 There do not appear to be any legal issues in doing so.

 But at second glance, Friedman might say yes.

 There could be huge anti-Merck social sentiment if
Merck did nothing and people found out about it.
 The positive reputation and PR from developing the
drug might actually lead to extra profits for Merck.

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 Merck Case − Stakeholders
 Kant
 Reversible? Merck management needs to put
itself in the shoes of the river blind.
 Respect for persons? Abandoning millions of
people to an agonizing future simply to increase
profits treats them as means only.
 What are the options?
 Can’t forget about it.
 Could turn preliminary findings over to UN.
 Could develop the drug.

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 Merck Case − Utilitarianism

 Sum benefits and consequences across all

stakeholders and chose the one with greatest net
benefit for all.
 Can’t forget about the drug.
 Turning preliminary findings over to UN is
marginal.
 Developing the drug maximizes net benefit.

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 Merck Case – Final Outcome

 Merck developed the drug with full expectation of

not recovering its investment.
 Turned out to require one pill per year.
 Moreover, Merck paid to develop the distribution
system.
 Compare this outcome to the selected option.

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 An Ethical Decision-Making
Process:
 Determine the facts
 Identify the ethical issues involved
 Identify stakeholders and consider the situation from their point of view
 Consider the available alternatives – also called “moral imagination”
 Consider how a decision affects stakeholders, comparing and weighing
the alternatives, based on:
 Consequences
 Duties, rights, principles
 Implications for personal integrity and character
 Make a decision
 Monitor outcomes
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 Determine the Facts

 Making an honest effort to understand the situation, to

distinguish facts from mere opinion, is essential.
 Knowing the facts and carefully reviewing the
circumstances can go a long way to resolving
disagreements at an early stage.
 The sciences, and perhaps especially the social sciences,
can help us determine the facts surrounding our
decisions.

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 Identify the ethical issues
involved
 A second step in responsible ethical decision making requires
the ability to recognize a decision or issue as an ethical
decisions or ethical issue.
 It is easy to be led astray by a failure to recognize that there is
an ethical component to some decision.
 In many business situations, what appears to be an ethical
issue for one person will be judged as a simple financial
decision by others.
 How does one determine that an issue raises an ethical issue at all?
 When does a business decision become an ethical decision?

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 Identifying Ethical Issues

 We need to recognize that “business” or

“economic” decisions and ethical decisions are
not mutually exclusive. Just because a decisions
is made on economic grounds does not mean that
it does not involve ethical considerations as well.

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 Identifying Ethical Issues

 Being sensitive to ethical issues is an important

characteristic that needs to be cultivated in ethically
responsible people.
 We also need to ask how our decisions will impact the
well-being of the people involved.
 To the degree that a decision affects the well-being—
the happiness, health, dignity, integrity, freedom,
respect—of the people involved, it is a decision with
ethical implications.

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 Identifying Stakeholders

 "Stakeholders" in this general sense includes all

of the groups and/or individuals affected by a
decision, policy or operation of a firm or
individual.
 Considering issues from a variety of perspectives
other than one’s own, and other than what local
conventions suggest, helps make one’s decisions
more reasonable and responsible.
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 Identifying Stakeholders
 To the contrary, thinking and reasoning from a narrow
and personal point of view virtually guarantees that
we will not have understood the situation fully.

 Making decisions from a narrow and personal point of

view likewise guarantees that we likely have made a
decision that does not give due consideration to other
persons and perspectives.

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 Consider the Available
Alternatives
 Creativity in identifying options – also called “moral
imagination” – is one element that distinguishes
good people who make ethically responsible
decisions from good people who do not.
 It is important not to consider only the obvious
options with regard to a particular dilemma, but also
the much more subtle ones that might not be evident
at first blush.

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 Compare and Weigh The
Alternatives
 Create a mental spreadsheet that evaluates the impact of each alternative
you have devised on each stakeholder you identified.
 Perhaps the most helpful way to accomplish this task is to try to place
oneself in the other person’s position.
 Understanding a situation from another’s point of view, making an effort
to “walk a mile in their shoes,” contributes significantly to responsible
ethical decision-making.
 Weighing the alternatives will involve predicting the likely, the
foreseeable, and the possible consequences to all of the relevant
stakeholders.
 A critical element of this evaluation will be the consideration of ways to
mitigate, minimize, or compensate for any possible harmful
consequences or to increase and promote beneficial consequences.
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 Compare and Weigh the
Alternatives: Some options
 But consequences or justifications are not the only means for comparing
alternatives. Some alternatives might concern matters of principles,
rights, or duties that override consequences.
 Within business settings, individuals will often have specific duties
associated with their position. A purchasing manager for a large retail
store has a duty associated with her role that directs her to avoid conflicts
of interest in dealing with suppliers.
 Are there duties associated with company rules, professional codes of
conduct, business roles, or legal duties involved?
 Perhaps there is guidance available in specific circumstances from these
sources or others.

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 Compare and Weigh the
Alternatives: Some options
 One additional factor in comparing and weighing alternatives requires
consideration of the effects of a decision on one’s own integrity and
character.
 Understanding one’s own character and values should play a role in
decision-making.
 A responsible person will ask: “What type of person would make this
decision?” What kind of habits would I be developing by deciding in one
way rather than another? What type of corporate culture am I creating
and encouraging? How would I, or my family, describe a person who
decides in this way? Is this a decision that I am willing to defend in
public?”

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 Making the Decision,
then Monitor it
 It is time to make the decision.
 An accountable decision requires the ability to offer a
justification or reason to support the decision. As a first step
in making ethically responsible decisions, one must be
prepared to offer reasons to support the decision.
 To be accountable in our decision-making, we have a
responsibility to evaluate the implications of our decisions, to
monitor and then learn from the outcomes, and to modify
our actions accordingly when faced with similar challenges in
the future.
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 Why do “Good” People engage
in “Bad” Acts?
 Sometimes, of course, people can simply choose to do
something unethical.
 We should not underestimate the real possibility of immoral
choices and unethical behavior.
 Sometimes, well-intentioned people fail to choose ethically.
 This does not mean that these unethical decisions or acts are
excusable but that the individuals who engage in the unethical
behavior may have done so for a variety of reasons.
 As it turns out, there are many stumbling blocks to
responsible decision-making and behavior. . . .
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 Explaining “Bad” Acts?
 Cognitive or intellectual stumbling blocks: As suggested by the model of
ethical decision-making outlined above, a certain type of ignorance can
account for bad ethical choices.
 Limitations: We sometimes only consider limited alternatives.
 When faced with a situation that suggests two clear alternative
resolutions, we often consider only those two clear paths, missing the
fact that other alternatives might be possible.
 Responsible decision making would require that we discipline ourselves
to explore additional methods of resolution.
 Simplified decision rules are most comfortable to us: Having a simple
rule to follow can be reassuring to many decisions-makers.
 Using a simple decision rule might appear to relieve us of accountability
for the decision, even if it may not be the best possible decision.
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 Explaining “Bad” Acts?
 “Satisficing” - We also often select the alternative that
satisfies minimum decision criteria.
 We select the option that suffices, the one that people can live
with, even if it might not be the best.
 Issues of motivation and willpower:
 As author John Grisham explained in his book, Rainmaker,
“Every (lawyer), at least once in every case, feels himself crossing
a line he doesn’t really mean to cross. It just happens.”
 Sometimes it is simply easier to do the wrong thing.

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 Ethical Decision-Making in
Managerial Roles
 Social circumstances can make it easier or more difficult to
act in accordance with one’s own judgment.
 Within business, an organization’s context sometimes make it
difficult for even the best-intentioned person to act ethically,
or it can make it difficult for a dishonest person to act
unethically.
 Responsibility for the circumstances that can encourage
ethical behavior and discourage unethical behavior falls to the
business management and executive team.

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 Managerial Roles
 The decision-making model introduced in this chapter develops from the
point of view of an individual who finds herself in a particular situation.
 Personal integrity lies at the heart of such individual decision-making:
what kind of person am I? What are my values? What do I stand for?
 But every individual also fills a variety of social roles and these roles
carry with them a range of expectations, responsibilities, and duties.
 Some of our roles are social: friend, son\daughter, spouse, citizen,
neighbor.
 Some are institutional: manager, teacher, student body president.
 Among the major role-responsibilities that we will examine in this text
are those associated with specific professions: attorneys, accountants,
auditors, financial analysts, etc.
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 Roles & Responsibilities in
Business
 Decision-making in these contexts raises broader questions of
social responsibilities and social justice.
 In a business context, individuals fill roles of employees,
managers, senior executives, board members.
 Managers, executives, board members have the ability to create
and shape the organizational context in which all employees make
decisions.
 They therefore have a responsibility to promote organizational
arrangement that encourage ethical behavior and discourage
unethical behavior.

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 Vocabulary Terms
 After examining this Chapter, you should have a clear
understanding of the following Key Terms:

 Accountability
 Ethical decision-making process
 Perceptual differences
 Personal and professional decision-making

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