Chapter 2: Ethical Decision-Making: Personal and Professional Contexts Chapter Objectives After reading this chapter, students 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. Opening Decision Point What Would You Do? Students are given the following three scenarios and asked what they would do in these situations. Scenario 1: You are the first person to arrive in your classroom and as you sit down you notice an iPod on the floor underneath the adjacent seat. You pick it up and turn it on. It works fine and even has some of your favorite music listed. You realize that you are the only one in the room and no one will know if you keep it. You see other students entering the room so you place the iPod on the floor next to your belonging. You will have the whole class period to decide what to do. Scenario 2: Instead of finding the iPod, you are a friend who sits next to the person who finds it. As class begins, your friend leans over and asks your advice about what to do. Scenario 3: You are now a student representative on the judicial board at school. The student who kept the iPod is accused of stealing. How would you make the decision about the situation? Students are asked to consider the following questions related to the above scenarios. • What are the key facts that you should consider before making a decision, as either the person who discovered the iPod, the friend, or the judicial board member? • Is this an ethical issue? What exactly are the ethical aspects involved in your decision? • Who else is involved, or should be involved, in this decision? Who has a stake in the outcome? • What alternatives are available to you? What are the consequences of each alternative? • How would each of your alternatives affect the other people you have identified as having a stake in the outcome? • Where might you look for additional guidance to assist you in resolving this particular dilemma? I. Introduction a. Putting Ethics into Practice: Ethics requires not simply decision-making, but accountable decision-making. i. Even if a person does not consciously think about a decision, her or his own actions will involve making a choice and taking a stand. 1. Example: If you find a lost iPod, you cannot avoid making an ethical decision, whether by act or omission, about what to do with it. Whatever you do with the iPod, you will have made a choice that will be evaluated in ethical terms and have ethical implications. b. Ethical Decision Making in Everyday Life: This chapter examines various elements involved in individual decision making and applies those concepts to the decisions individuals make every day in business. The chapter also explores: i. Ways ethical decision making can go wrong. ii. Ways effective business leaders can model the most effective ethical decision-making. II. A Decision Making Process for Ethics a. What is the Ethical Decision-Making Process? i. We explore the application to the opening Decision Point - How would you decide what to do in the iPod case at the beginning of the chapter? First, you might wonder how the iPod ended up under the desk. Was it lost? Perhaps someone intentionally discarded the iPod. Wouldn’t that fact make a significant difference in the ethical judgment that you would make? Or, suppose the person who discovered the iPod actually saw it fall from another student’s backpack. Would that make a difference in your judgment about that person? ** Teaching Note: This discussion should be tied back to Chapter One and students should be reminded that an ethics course strives to help them think for themselves. Always in the background are the dual pitfalls of dogmatism, which imposes one correct ethical view on all, and relativism, which denies that there is any correct ethical view. This decision-making process provides the middle ground between dogmatism and relativism. *Chapter Objective 1 Discussed Below* b. Step 1: Determine the Facts of the Situation. i. It is essential to make an honest effort to understand the situation, and to distinguish facts from mere opinion. ii. Perceptual differences surrounding how individuals experience and understand situations can explain many ethical disagreements. Knowing the facts and carefully reviewing the circumstances can go a long way towards resolving disagreements at an early stage. iii. Example: Let us turn to the iPod case. What facts would be useful to know before making a decision? Suppose you already owned an iPod. Would that make a difference? Suppose you knew who sat at the desk in the previous class. Imagine that, in fact, the iPod had been in a place not easily seen and you had observed it there over the course of several days. Suppose the iPod did not work and, instead of being discovered underneath a seat, you found it in a wastebasket. How would your decision change as any of these facts changed? Can you imagine a situation in which what looks like an ethical disagreement turns out to be a disagreement over the facts? iv. Role of Science (and Theoretical Reason) in Ethics: 1. An ethical judgment made in light of a diligent determination of the facts is a more reasonable ethical judgment that one made without regard for the facts. A person who acts in a way that is based upon a careful consideration of the facts has acted in a more responsible way—ethically and rationally more responsible—than a person who acts without deliberation. 2. The sciences, and perhaps especially the social sciences, can help us determine the facts surrounding our decisions. As a business example, consider what facts might be relevant for making a decision regarding child labor. Consider how the social sciences of anthropology and economics, for example, might help us understand the facts surrounding employing children in the workplace within a foreign country. 3. Applying this strategy to a business operation would encourage business decision-makers to seek out perhaps alternative or somewhat less traditional methods of fact gathering to ensure that she or he has compiled all of the necessary data in processing the most ethical decision. c. Step 2: Identifying the Ethical Issues Involved. i. It is crucial to recognize a decision or issue as an ethical decision or ethical issue. It is easy to be led astray by a failure to recognize that there is an ethical component to some decision. ii. It is important to ask questions about the ethical implications of a decision or issue: How does one determine that a question raises an ethical issue at all? When does a business decision become an ethical decision? iii. “Business” or “economic” decisions and ethical decisions are not mutually exclusive. Just because a decision is made on economic grounds does not mean that it does not involve ethical considerations as well. iv. Being sensitive to ethical issues is a vital characteristic that needs to be cultivated in ethically responsible people. 1. How will our decisions impact the well-being of the people involved? 2. To the degree that a decision affects the well-being—the happiness, health, dignity, integrity, freedom, respect—of the stakeholders, it is a decision with ethical implications. 3. Shall we also consider then the environment, animals, future generations? There are often ethical implications for these entities, as well. In the end, it is almost impossible to conceive of a decision we might make that does not have at least some impact on the well-being of another. v. Normative myopia, or shortsightedness about values, can occur in business contexts when one is unable to recognize ethical issues. Normative myopia does not occur only in businesses, as the Reality Check below displays. *Reference: “Reality Check - Is There an Ethics of Writing Papers?”* *Reference: “Reality Check – Bounded Ethicality”* vi. Inattentional blindness can result from focusing failures when we happen to focus - or we are told specifically to pay attention to a particular element of a decision or event – and we miss all of the surrounding details, no matter how obvious. vii. Change blindness occurs when decision-makers fail to notice gradual changes over time, such as when Arthur Andersen auditors did not notice how low Enron had fallen in terms of its unethical decisions. One of the means by which to protect against these decision risks is to ensure that decision-makers seek input from others in their decision processes. d. Step 3: Identify and Consider All of the “Stakeholders” Affected by the Decision. i. “Stakeholders” in this general sense include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. ii. 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. *Reference “Figure 2.1 – Stakeholder Map”* iii. Shifting one’s role is helpful in considering the affects of a decision on others. 1. Rather than being in the position of the person who discovers the iPod, what would you think of this case if you were the person who lost it? How does that impact your thinking? What would your judgment be if you were the friend who was asked for advice? iv. Key Test of Ethical Legitimacy: Whether or not a decision would be acceptable from the point of view of all parties involved. 1. If you could accept a decision as legitimate no matter whose point of view you take, that decision would be fair, impartial, and ethical. 2. Example: If you acknowledge that you would not accept the legitimacy of keeping the iPod were you the person who lost it rather than the person who found it, then that is a strong indication that the decision to keep it is not a fair or ethical one. 3. Example: Consider Enbridge’s decisions after the oil spill in Wrigley, as described in Chapter 1. Considering only its obligation to its shareholders might lead to a decision to satisfy only the minimum legal requirements for cleaning up the site, to avoid additional costs that would negatively impact profits. However, a decision that considers only the shareholders’ point of view would not be a responsible decision. The spill also affected the residents of Wrigley, who are heavily dependent on the forests and waterways in the area for their livelihood and ways of life. Decision Point: Who Matters, After an Oil Spill? Students are asked to think back to the Decision Point in the first chapter, “Ethics After an Oil Spill.” One of the key challenges Enbridge faced involved determining the identity of its key stakeholders. To whom does the company owe obligations in the wake of the oil spill? But once the company has identified its stakeholders, then what? Challenge students consider the relatively easy example of a group that is directly affected: the residents of the tiny town of Wrigley, and to determine what the company owes to this group. The following questions are included in this Decision Point to facilitate student reflection or discussion of Enbridge’s obligations to this stakeholder group: • Are the residents of Wrigley owed a clean-up effort that restores the area to its state prior to the spill, or should the clean-up process only go as far as the law demands? • Are the people of Wrigley owed a speedy cleanup? How speedy--and at what cost? • Do they have a right to participate in the decision-making, or just to be kept informed? • Does Enbridge have an obligation to go beyond repairing the damage from the spill and contribute to community development projects, such as a "swimming pool or a hockey arena or something for the kids," as suggested by one resident? v. A major challenge to ethical decision-making is that decisions involve the interests of multiple stakeholders and each alternative will impose costs on some stakeholders and offer benefits to others. *Reference: “Reality Check – BHP Billiton’s Stakeholder Relationships”* e. Step 4: Consider the Available Alternatives. i. 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. ii. Consider both the obvious and subtle options with regard to a particular dilemma. 1. When reviewing the Enbridge circumstances, ask yourself how Enbridge might utilize moral imagination in its response to various stakeholders affected by the oil spill, particularly the townspeople of Wrigley. 2. Or consider the case of discovering a lost iPod. One person might decide to keep it because she judges that the chances of discovering the true owner are slim and that if she does not keep it, the next person to discover it will make that decision. 3. Moral imagination might be something simple like checking in a lost and found department. f. Step 5: Compare and Weigh the Alternatives. i. Create a mental spreadsheet that evaluates the impact of each alternative you have devised on each stakeholder you defined. ii. 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. iii. Predict the likely, the foreseeable, and the possible consequences to all the relevant stakeholders. iv. Consider ways to mitigate, minimize, or compensate for any possible harmful consequences or to increase and promote beneficial consequences. v. Consider how the decision will be perceived by others: 1. Would you feel proud or ashamed if The Wall Street Journal printed this decision as a front page article? Could you explain the decision to a ten-year-old child so the child thinks it is the right decision? Will the decision stand the test of time? 2. Would your behavior change if other people knew about it? Typically, it is the irresponsible decisions that we wish to keep hidden. *Reference: “Reality Check – The Ultimate Recognition of Impact on Stakeholders”* vi. Some alternatives might concern matters of principles, rights, or duties that override alternatives. *Reference: “Reality Check – Seeking Guidance?”* vii. One additional factor in comparing and weighing alternatives requires consideration of the effects of a decision on one’s own integrity, virtue, and character. 1. Understanding one’s own character and values should play a role in decision-making. 2. 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?” 3. An honest person might not even thing about retaining the iPod; keeping it for oneself is simply not an option for such a person. g. Step 6: Make a Decision. i. Our ability to learn from our experiences creates a responsibility to then: 1. Evaluate the implications of our decisions. 2. Monitor and learn from the outcomes. 3. Modify our actions accordingly when faced with similar challenges in the future. ii. The reading by Bowen McCoy, “Parable of the Sadhu,” demonstrates this deliberative process. 1. McCoy reviews his decision-making after the fact and evaluates the implications of his decision, recognizing the responsibility that each participant had for the outcome that results. 2. However, McCoy points out that it is more effective to have the time and space in which to consider these questions before we are faced with them than it is to consider them when they become urgent. h. The value of this approach: Other approaches to ethically responsible decision-making are possible, and this approach will not guarantee one single absolute answer to every decision. But it is a helpful beginning in the development of responsible and ethical decision-making. *Chapter Objective 2 Addressed Below* *Reference: “Figure 2.2 – An Ethical Decision-Making Process”* Decision Point Applying the Decision-Making Model This Decision Point explains that Richard Grasso, former Chairman of the New York Stock Exchange, was given an enormous compensation package by the Board of Directors at the NYSE. His salary was determined by the employment contract he had signed with the NYSE board of directors. Grasso resigned in the face of public criticism of his pay package and initially he agreed to forgo the final $48 million in retirement benefits. Most of the members of the board were personal friends of Grasso. He had appointed them to their positions and played a role in determining their pay. At the time, the NYSE was a nonprofit organization that regulated publicly traded companies. Those companies being regulated were ultimately the same companies that were paying Grasso his salary. This situation raises concerns about conflicts of interest, deception, fraud, misallocation of funds, theft, and personal ethical questions about greed and arrogance. The stakeholders here include the members of the board, other employees of NYSE, and every company whose securities are traded on the NYSE and every investor who relies on the integrity of the NYSE to oversee and regulate the sale of securities. Students are asked to consider how one would use the ethical decision making mode to determine whether Grasso should return any of his compensation package. Students would follow the steps of the decision making model process to make this determination. III. When Ethical Decision-Making Goes Wrong: Why Do “Good” People Engage in “Bad” Acts? a. Individuals do not always make the responsible, autonomous decisions of which they are capable. i. There are many ways in which responsible decision making can go wrong and many ways in which people fail to act in accordance with the ethical judgments they make. ii. Sometimes people can simply choose to do something unethical. We should not underestimate the real possibility of immoral choices and unethical behavior. iii. Sometimes well-intentioned people fail to choose ethically. b. Why do people we consider to be “good” do “bad” things? What factors determine which companies or individuals engage in ethical behavior and which do not? *Chapter Objective 3 Addressed Below* c. Stumbling Blocks: There are many stumbling blocks to responsible decision making and behavior, which are either cognitive or intellectual. i. A certain type of ignorance can account for bad ethical choices. Sometimes that ignorance can be almost willful and intentional. 1. After you discover a lost iPod, you might rationalize to yourself that no one will ever know, that no one is really going to be hurt, that an owner who is so careless deserves to lose the iPod. 2. You might try to justify the decision by telling yourself that you are only doing what anyone else would do in this circumstance. 3. You might even choose not to think about it and try to put any guilty feelings out of your mind. ii. Sometimes we only consider limited alternatives. 1. 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. 2. Responsible decision making would require that we discipline ourselves to explore additional methods of resolution. d. Having a simple rule to follow can be reassuring and comfortable to many decision makers. i. Example: Assume you are a business manager who needs to terminate a worker in order to cut costs. Of course, your first thought may be to uncover alternative means by which to cut costs instead of firing someone, but assume for the moment that cutting the workforce is the only viable possibility. It may be easiest and most comfortable to terminate the last person you hired, explaining, “I can’t help it; it must be done, last in/first out, I have no choice . . .” ii. 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. 1. i.e. You did not “make” the decision; the rule required the decision to be made. e. We also often select the alternative that satisfies minimum decision criteria, otherwise known as “satisficing,” even if it might not be the best. f. Other stumbling blocks are a question of motivation and will-power. i. 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.” ii. Sometimes it is simply easier to do the wrong thing. *Reference: “Reality Check - The Ethics of Cheating”* g. Unfortunately, we do not always draw the lines for appropriate behavior in advance, and even when we do, they are not always crystal clear. i. As Grisham suggests, it is often easy to do a little thing that crosses the line, and the next time it is easier, and the next easier still. ii. People also sometimes make decisions they later regret because they lack the courage to do otherwise. iii. It is not always easy to make the right decision; you might lose income, your job, or other valuable components of your life. iv. Courage is also necessary when responding to significant peer pressure. v. We tend to give in to peer pressure in our professional environments, both because we want to “fit in” and to achieve success in our organizations, and also because our actual thinking is influenced by our peers. h. Why Make Unethical Decisions? i. Environment: Sometimes the corporate or social environment is rife with ethical challenges and unethical decisions. 1. Example: The enormous amounts of corporate executive compensation, lack of oversight of corporate executive decisions, significant distance between decision-makers and those they impact, financial challenges, and a set of ethical values that has not yet caught up to technological advances. ii. We can benefit from unethical acts, from gaining something as simple as an iPod, to something as significant as a salary package of $180 million. Decision Point Ethical Oil: Choose Your Poison In the fall of 2011, a Canadian organization called EthicalOil.org started a public-relations campaign aimed at countering criticism of commercial development of Canada’s oil sands. Extracting oil from these sands does immense environmental damage. EthicalOil.org seeks to counter such criticism by pointing out the alternative: choosing not to buy oil harvested from Canada is effectively choosing oil produced by non-democratic Middle-Eastern countries with very bad records of human rights abuses. This decision point asks students to discuss the ethical trade-offs between different choices, neither of which is perfect. Students are given the following questions to ask themselves: • Imagine you have the choice, as a consumer, between buying gas for your car that comes from a country where oil extraction does vast environmental damage, and buying gas from a country where the profits from that oil help support a dictatorship with a history of human rights abuses. Which gas will you buy? Why? Are you willing to pay a bit extra to get oil that is more ethical, whatever that means to you? • Imagine that you are responsible for securing a contract to provide gas for your company’s fleet of vehicles. If the choice is available to you, will you choose the most environmentally-friendly gas? Or the gas least associated with human rights abuses? Or will you just go with the cheapest gas available? Consider whether the choice between buying gas that harms the environment and gas that contributes to human rights abuses exhausts the alternatives in these scenarios. Are there other courses of action available to the individual car-owning consumer? To the manager responsible for procuring gas for the company fleet? Stress the importance of considering the answers to these questions before you are actually faced with a decision. i. Making Ethically Responsible Decisions: is a serious challenge we all face throughout life. i. The easiest thing to do would be to remain passive and simply conform to social and cultural expectations, to “go with the flow.” ii. To live a meaningful human life, we must step back and reflect on our decisions, assuming the responsibility of autonomous beings. j. Ethical Individuals: Some individuals do not succumb to temptations and may not even deliberate in the face of an ethical dilemma. i. Many people have developed a certain type of character, a set of ethical habits that will encourage them, without deliberation, to act ethically. ii. Developing such habits, inclinations, and character is an important aspect of living an ethical life. ** Teaching Note: (See Reality Check earlier in the chapter, “Bounded Ethicality.”) IV. Ethical Decision-making in Managerial Roles a. Social Context: Decision making can be greatly influenced by the social context in which it occurs. Social circumstances can make it easier or more difficult to act in accordance with one’s own judgment. i. 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. ii. Responsibility for the circumstances that can encourage ethical behavior and can discourage unethical behavior falls predominantly to the business management and executive team. b. Integrity’s Role: 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, or do I aspire to be? What are my values? What do I stand for? Compare Aaron Feuerstein and one of the Enron executives: what type of person are they? What are their wants, interests, beliefs, values? c. Personal and Professional Decision Making: The ethical implications of both must be considered within the business setting. d. Social Roles: Every individual fills a variety of social roles, and these roles carry with them a range of expectations, responsibilities and duties. i. Social roles include: friend, son or daughter, spouse, citizen, neighbor, and others. ii. Institutional roles include: manager, teacher, student body president, and others. iii. Decision making in these contexts raises broader questions of social responsibilities and social justice. *Chapter Objective 4 Addressed Below* e. Consider: How different roles might impact your judgment about an ethical dilemma. i. Your judgment about the iPod might differ greatly if you knew that your friend had lost it, or if you were a teacher in the class, or if you were a member of the campus judicial board. ii. Our judgment about Richard Grasso might change when we learn that his professional responsibility included oversight of a regulatory body that governed the very companies that were paying his salary. f. Organizational Roles: In a business context, individuals fill roles such as managers, executives, and board members, who have the ability to create and shape the organizational context in which all employees make decisions. i. Individuals, therefore, have a responsibility to promote organizational arrangements that encourage ethical behavior and discourage unethical behavior. g. The following three chapters develop these topics: i. Chapter 3 will provide an overview of how some major ethical traditions might offer guidance both to individual decision-makers and to those who create and shape social organizations. ii. Chapter 4 will examine topics of corporate culture, ethical organizations, and ethical leadership. iii. Chapter 5 examines corporate social responsibility, the ends towards which ethical organizations and ethical leaders should aim. Opening Decision Point Revisited What Would You Do? This case could be discussed in a different way than presented. Ask students to discuss situations in which it would be ethically permissible to keep an iPod that one found in a classroom. What circumstances would make this decisions ethically permitted? Rather than approaching the question from the perspective of what makes a decisions ethically wrong, approach it from the opposite direction: what makes a decisions ethically right? Distinguish the case in which keeping it could be excused or forgiven, from cases in which it is the right thing to do. Instructor Manual for Business Ethics: Decision Making for Personal Integrity and Social Responsibility Laura P. Hartman, Joseph R. Desjardins, Chris MacDonald 9780078029455, 9781259060588, 9781259417856
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