Models of Ethical Decision Making

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What factors within an organization do you think affect ethical
decision making?

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 6-1 Framework for Understanding
Ethical Decision Making in Business

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 1 of 6
Ethical Issue Intensity
• Ethical awareness – The ability to perceive whether a situation or decision
has an ethical dimension
• Ethical issue intensity – The relevance or importance of an event or
decision in the eyes of the individual, work group, and/or organization
– Personal and temporal in character to accommodate values, beliefs, needs,
perceptions, the special characteristics of the situation, and the personal pressures
prevailing at a particular place and time

• Moral intensity – Individuals’ perceptions of social pressure and the harm

they believe their decisions will have on others

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 2 of 6
Individual Factors
• Gender – In ethical decision making, research shows that in many aspects
there are no differences between men and women.
• Education – A significant factor in the ethical decision-making process;
generally, the more education or work experience people have, the better
they are at making ethical decisions.
• Nationality – The legal relationship between a person and the country in
which they are born
• Age – An individual factor that has a complex relationship with
business ethics
– Younger managers are far more influenced by organizational culture.

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 3 of 6
Individual Factors (continued)
• Locus of control – Individual differences in relation to a generalized belief
about how one is affected by internal versus external events or
reinforcements
– External control – Individuals with this locus of control see themselves as
going with the flow because that is all they can do (life events are due to
uncontrollable forces).
– Internal control – Individuals with this locus of control believe they control the
events in their lives by their own effort and skill; they view themselves as
masters of their destinies and trust in their capacity to influence their
environment.

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Debate Issue: Take a Stand
• Tension between companies and employees over privacy in the workplace
– No laws prevent companies from monitoring and tracking employees.
• Companies believe not monitoring leaves them vulnerable to misconduct.
• Employees argue they have a right to privacy.
– They see tracking as a lack of trust.
– They think activity outside the workplace should not be monitored.
• Take a stand:
1. Companies should have the right to track employees through company
smartphones and monitor their personal Facebook and Twitter accounts.
2. Employees should be able to maintain their personal privacy and not be
tracked through their company smartphones or their Facebook and
Twitter accounts.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 4 of 6
Organizational Factors
• Corporate culture – A set of values, norms, and artifacts, including ways of
solving problems that members (employees) of an organization share
– Mission statements and objectives
• Ethical culture – Acceptable behavior, defined by the company and industry
– Reflects the integrity of decisions made and is a function of factors, including
corporate policies, top management’s leadership on ethical issues, the influence of
coworkers, and the opportunity for unethical behavior
• Significant others – Those who have influence in a work group, including
peers, managers, coworkers, and subordinates
• Obedience to authority – A reason employees resolve business ethics
issues by simply following the directives of a superior
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 5 of 6
Opportunity
• Opportunity – The conditions in an organization that limit or permit ethical
or unethical behavior
– Immediate job context – Where individuals work, whom they work with, and the
nature of the work

• Can be deterred with formal codes, policies, and rules adequately enforced
by management
– Misconduct can still occur without proper oversight

• Also comes from knowledge, exploiting knowledge

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A Framework for Ethical Decision
Making in Business 6 of 6
Business Ethics Intentions, Behavior, and Evaluations
• Ethical business issues, dilemmas involve problem-solving situations where
the rules governing decisions are often vague or in conflict.
• When intentions and behavior are inconsistent with their ethical judgment,
people may feel guilty.
– The next step is changing the behavior to reduce such feelings.

• The road to success depends on how the businessperson defines success.

– Success drives intentions and behavior in business either implicitly or explicitly.

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Using the Ethical Decision-Making
Model to Improve Ethical Decisions 1 of 1
• An ethical decision-making model does not help in determining if a business
decision is right or wrong.
– It is intended to provide insights about ethical decision making in businesses.
– Business ethics involves value judgments and collective agreement about acceptable
patterns of behavior.

• Gaining an understanding of the factors that make up ethical decisions helps

in differentiating between an ethical issue and a dilemma.

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Normative Considerations in
Ethical Decision Making 1 of 3
• Normative approaches – How organizational decision makers should
approach an issue
– Different from a descriptive approach that examines how organizational decision
makers approach ethical decision making

• Most organizations develop a set of core values to provide enduring beliefs

about appropriate conduct within the firm.
– Instrumental concern – Focuses on positive outcomes, including firm profitability
and benefits to society

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Normative Considerations in
Ethical Decision Making 2 of 3
Institutions as the Foundation for Normative Values
• Institutional theory – Theory that organizations operate according to taken-
for-granted institutional norms and rules
– Government, religion, and education are institutions that influence the creation of
values, norms, and conventions.

• Industry competition determined by:

– Barriers to entry into the industry
– Available substitutes for the products produced by the industry rivals
– The power of the industry rivals over their customers

– The power of the industry rivals’ suppliers over other rivals

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Normative Considerations in
Ethical Decision Making 3 of 3
Implementing Principles and Core Values in Ethical Business Decision Making
• Veil of ignorance – A thought experiment that examined how individuals would
formulate principles if they did not know what their future position in society
would be
• https://www.youtube.com/watch?v=YLInfO_iLNg
• Equality principle – States that each person has basic rights that are
compatible to the basic liberties of others
• Difference principle – States that economic and social equalities or inequalities
should be arranged to provide the most benefit to the least-advantaged
members of society
• Companies convert basic principles into core values:
– Provide the abstract ideals; operate in a sustainable manner, collaboration and teamwork,
avoid bribery;
O.C. Ferrell,provide a blueprint
John Fraedrich, into
and Linda Ferrell, the Ethics:
Business firm’s goals,
Ethical ethical
Decision decision
Making and Cases, 13thmaking
Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 FIGURE 6-4 Principles and Values

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Knowledge Check
Question: What states that each person has basic rights that are compatible to
the basic liberties of others?

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Understanding Ethical Decision Making
• Top-level support for ethical behavior is instrumental in helping employees
engage in their personal approaches to ethical decision making.
• Normative perspectives set forth ideal goals to which organizations should
aspire.
• Knowledge about ethical decision making helps in making good decisions.

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Discussion Activity

• Why is effective leadership so important for an organizational ethical

culture?

O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.