Ethical Decision Making

Published July 15, 2013 by Mayrbear's Lair

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Making difficult decisions in a corporate arena is a complicated process for leaders, especially if they lack sufficient skills to make effective ones. Ferrell et al. (2013) suggest there are a variety of components leaders take into consideration when making decisions. They include identifying: (a) the ethical issue intensity, (b) the individual factors, and (c) the organizational factors and opportunities. These are integral elements that influence the decision making process (Ferrell, Fraedrich, & Ferrell, 2013). When making decisions, leaders must comprehend that there are both advantages and disadvantages in each decision they make. For example, standing by their moral values, a loan officer may decline approval for a $10 million dollar loan to a subsidiary of a tobacco company because of their personal views on promoting deadly products. The advantage of this decision is that it supports that individual’s moral principles. This decision portrays an individual that has adopted an idealistic kind of approach in the way they conduct business, in that they have embraced special idealist values and applies them to help make decisions that reflect a socially responsible form of business practice. Because their views are not part of corporate policy, the disadvantage of this decision is that the client went to competitors instead and secured a loan. In short, the choices were ethical to the individual, but resulted in a huge profit loss for the corporation.

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When leaders engage in important decisions, they must also consider both the ethical and legal aspects of the situation to make the most effective decisions. Ferrell et al. (2013) suggest that an individual’s locus of control influences their behavior. Their studies deduced that people who believe their destiny is controlled by others are usually not as ethical as those who believe they control their own destiny (Ferrell, Fraedrich, & Ferrell, 2013). For example, CEO’s and other top level executives are in a position of power and control for both the short and long term destiny of the company. Each want to make the best decision that is in alignment with the ethical culture of the corporation as well as their own. Ethical decisions include such things as deciding who to conduct business with and whether profits are more significant than outcomes and social responsibilities. By choosing to do business with people that are distributing and manufacturing products or services that bring harm and death to others, leaders must not only face the ethical issues involved but the legal ramifications as well. For example, by selling tobacco products outside the US where restrictions are less binding, a manager is essentially supporting profits over the welfare of innocent people. Corporations are entities and therefore do not experience feelings for people, however, the leaders and managers with families of their own, tend to feel a sense of moral obligation to protect humanity regardless of color or race. Even though a corporation is an entity that does not have feelings, it can still feel the ramifications should legal action be taken against the corporation in the future by victims for intentionally selling merchandise that causes harm from the addictive and toxic additives that are included in their products.

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Most people rely on their own principles to resolve moral issues on a day to day basis. Every leader has significant ethical and legal issues to consider that rely on the organizational culture and the moral philosophies they adapt to help in the decision making process. For example, leaders whose decisions are based on a philosophy known as virtue ethics can make decisions that turn down large profits because their choices are dictated in accordance with that individual’s ideals and the sense of morality that individual develops from their own character which tend to consist of good morals and mature perspectives. Other executives reject deals to sell products that harm consumers because of a deontological moral philosophy which is based on preserving individual rights and the intent to remain steadfast to those beliefs. A corporation on the other hand, is an entity and only interested in end results: profits. Therefore, corporations tend to fall under the teleological view of moral philosophy with focus on achieving end results that benefits all. Regardless of moral philosophy, all decision makers must carefully consider the legal parameters involved as well to avoid violations and harsh penalties.

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In conclusion, leaders want to perform at optimum levels and corporations want to enjoy success. However, as the global market continues to expand, executives, together with their corporations, are taking more measures to incorporate commitment to product integrity and social responsibility. Boatright (2009) contend that a distinguishing aspect of business is its economic character because relationships are based on economics and profit (Boatright, 2009). The bottom line is that leaders have discovered making decisions that are socially responsible is just a good way of doing business in the modern era. Corporations that behave as a tool for change, hire leaders that are motivated to make decisions in alignment with ethical policies. They are conscious of making decisions that do not create harmful outcomes to their stakeholders or the environment. Leaders and corporations whose basic tenets display socially responsible practices like recycling, adopting environmentally conscious policies, incorporate transparency in their operations, and are mindful of how their business generates profits, build trust and confidence from primary and secondary stakeholders which ultimately contributes to the overall success of that organization.

References:

Boatright, J. (2009). Ethics and the Conduct of Business (Sixth ed.). Upper Saddle River, NJ: Pearson Education, Inc.

Ferrell, Fraedrich, & Ferrell. (2013). Business ethics and social responsibility (9th ed.). Mason, OH: Cengage Learning.

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