Chapter 5

Ethical Decision
Making
 Understanding the Ethical
Decision-Making Process

►The first step in ethical-decision

making is to recognize than an
ethical issue requires an individual
or work group to choose among
several actions that various
stakeholders inside or outside the
firm will ultimately evaluate as
right or wrong.
 Framework for Understanding
Ethical Decision-Making in Business

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4
 1. Ethical Issue Intensity (concentration)

• Ethical issue intensity is the perceived (Seeing)

relevance or importance of an ethical issue to the
individual, work group, and/or organization.
– Reflects the ethical sensitivity of the individual
or work group and triggers the ethical decision
process
• Positive or negative incentives can affect the
perceived importance of an ethical issue.
• Employees need education regarding potential
problem areas.
2. Individual Factors
 Continue…
2. Individual Factors

► Individual factors include:

► Gender – women more sensitive with the unethical behavior and less
tolerant with that.
► Education and work experience – the more education or work
experience that a person have, the better they in ethical decision
making.
► Nationality – legal relationship between a person and the country in
which they is born.
► Age – older employees with more experience have greater knowledge to
deal with complex ethical issues.
Locus= position
3. Organizational Factors
 3.1 Corporate culture
►Corporate culture: a set of values,
beliefs, goals, norms and ways to solve
problems that members (employees) of
an organization share
►Some corporate cultures support
and reward unethical behavior.
►Ethical climate is a component of
corporate culture.
 3.1.1 Ethical Climate
• The character or decision processes used to
determine whether actions are ethical or unethical
• Consists of corporate codes of ethics, top
management actions, ethical policies, coworker
influence, and the opportunity for unethical
behavior
• The perceived ethics of the immediate work group
has been found to be a major factor influencing
ethical behavior.
 3.2 Significant Others
• The work group, which includes people such
as peers, managers, and subordinates
• Help on a daily basis with unfamiliar tasks
and provide advice and
information formally and informally
• Have more influence on daily decisions
than any other
factor
 3.2.1 Obedience to Authority

• An aspect of influence that significant

others can exercise
• Helps us explain why many employees
resolve business issues by simply following
the directives of a superior
 4. Opportunity
• Relates to permitting ethical or unethical behavior
• Rewards and punishment play a key role
• Relates to the employee’s immediate job context
• Can be eliminated by establishing formal codes,
policies, and rules that are enforced
 5. Business Ethics Evaluations
and Intentions

►Ethical dilemmas involve decision rules which are

often vague (unclear) or in conflict.
►Critical thinking plays a key role.
►A person’s intentions along with the final decision
on what action to take is the last step in the ethical
decision-making process.
►If intentions and behavior are not consistent with
ethical judgments, the individual may feel guilt.
►Most business people will make ethical mistakes.
 Mintzberg’s Modes of Strategic
Decision-making

Henry Mintzberg proposed that there are 3

modes through which managers make
decisions:
1) Entrepreneurial mode
2) Adaptive mode
3) Planning mode

PBS2163 : BUSINESS ETHICS

 Mintzberg’s Modes of Strategic
Decision-making
• Entrepreneurial Mode
• Strategy is made by one powerful individual who has
entrepreneurial competencies like innovation and risk
taking.
• The focus is on opportunities. Problems are
secondary.
• Generally the founder is the entrepreneur and the
strategy is guided by his or her own vision of direction
and is exemplified by bold decisions.
• In any event, strategy is set by an authoritative
decision maker.
PBS2163 : BUSINESS ETHICS
 Mintzberg’s Modes of Strategic
Decision-making
Adaptive mode
• The adaptive mode is where managers create reactive
solutions to existing problems, rather than a proactive
search for new opportunities. Simply wait on issues to
arise.
• This a fragmented approach to strategic decision making.
Because of the lack of directed focused development,
there is generally a lack of clarity and consensus on
strategic goals.
• The adaptive mode is commonly known as “muddling
through”. It is more appropriate for dealing with complex
and changing environments.
PBS2163 : BUSINESS ETHICS
 Mintzberg’s Modes of Strategic
Decision-making
• Planning Mode
• The planning mode of strategic decision
making is characterized by the systematic
gathering of relevant information for situation
analysis, the generation of feasible alternative
strategies, and the rational selection of the
most appropriate strategy.
• In summary, it is a proactive search for new
opportunities and the reactive solution of
existing problems.
PBS2163 : BUSINESS ETHICS
 End of Chapter 5
See you soon in next chapter
=D