ETHICS AND FUTURE OF BUSINESS

Session 2  Behaviors and Actions Article 1: Crane  Making decisions in business ethics Descriptive ethical theories Descriptive ethical theories: theory that describes how ethical decisions are actually made in business, and explains what factors influence the process and outcomes of those decisions We have already said that an ethical decision is concerned with choosing between right and wrong, but there is an important process of identification that goes before this. Number of factors should be identified: - The decision is likely to have significant effects on others; as we saw morality is concerned with harms and benefits. - The decision is likely to be characterized by choice, in that alternative courses of actions are open; a moral decision requires us to have a choice. - The decision is perceived as ethically relevant by one or more parties; the decision incurs immediately some degrees of ethicality. Models of ethical decision-making In general, the models primarily seek to represent two things: - The different stages in decision-making that people go through in responding to an ethics problem in a business context. - The different influences on that process. Mark Schwartz distinguishes two further broad perspectives on ethical decisionmaking as either rationalist or intuitionist/sentimentalist. The rationalist perspective assumes that a logical reasoning approach, a kind of calculation of what needs to be done, is followed prior to arriving at an ethical judgement. There is also a more recently developed range of approaches which involve the cognitive process of intuition and emotion or sentiments. According to these perspective, quick moral intuitions are key that is the idea that you just know what is right and wrong without stopping to think through all the possible permutations or logics which apply to a decision; it incorporates emotion-based mechanisms too. From a rationalist perspective, carried on by Schwartz and Rest, there are four distinct processes in an ethical decision-making: - Awareness: becoming aware that there is a moral issue at stake. Also referred to as interpreting the situation, sensitivity, or recognition. - Judgement: the decision-making itself, sometimes called moral evaluation or moral reasoning. - Intent: moral intent is established, which may be referred to as moral motivation, decision, or determination. - Behaviour: acting on these intentions through one’s behaviour can be referred to as action or implementation This is the most used and long-standing framework for conceptualizing rationalist ethical decision-making in business. These stages are intended to be conceptually distinct, such that although one stage in the model might be reached, this doesn’t mean you have to move onto the next one. The model distinguishes between knowing what the right thing to do is and actually doing something about it. ETHICS AND FUTURE OF BUSINESS The normative theory can be found here too, especially in relation to moral judgments since they can be made according to considerations of rights, duty, relationships, discourse, consequences, etc. Influences on ethical decision-making The factors that influence decision-making are divided into two broad categories: - Individual factors: unique characteristics of the individual actually making the relevant decision. Here are included factors given by birth such as age and those acquired by experience and socialization such as education. - Situational factors: particular feature of the context the influence whether the individual will make an ethical or unethical decision. These include factors associated with the work context such as reward system, and those associated with the issue itself such as the intensity of the moral issue. International perspective on ethical decision-making The framework for complete understanding ethical decision-making is: We could argue that research on individual factors influencing ethical decision-making has a strong North American bias, while situational factors, on the other hand, have been subject to a lengthy debate principally originated by European authors. The significance of this difference is that a focus on individual factors is consistent with the North American focus on choice within constraints, while a focus on situational factors reflects the more European concern with the constraints themselves. To begin with, the very founders of modern organizational theory in Europe have stressed the influence of social contexts on ethical decision-making, starting with Emile Durkheim who discussed the emergences of new work-related moral communities due to the effects of the Industrial Revolution on the erosion of traditional value system that held society together. Then Max Weber distinguished between actions that were guided by an ethic of absolute ends and an ethic of responsibility, the former representing an idealistic view of humanity, the latter an ethic that sees responsibility for the pursuit of the organization’s goals as the ultimate moral imperative. Individual influences on ethical decision-making Individual influences on ethical decision-making relate to these facets of the individual who is actually going through the decision-making process. Clearly, all employees bring certain traits and characteristics with them into an organization, and these are likely to influence the way in which the employee thinks and behaves in response to ethical dilemmas. Individual factors can help to explain why some people perceive particular actions to be unethical while others do not, hence, the issue is not so much about determining the reasons why people might be more or less ethical, but about the factors influencing us to think, fell, act, and perceive in certain ways that are relevant to ethical decision-making. Age and gender A good place to start in examining the individual influences on ethical decision-making is to consider some basic demographic factors, such as age and gender; gender has, in fact, been one of the individual influences on ethical decision-making in business most often subjected to investigation. However, overall the results have been less than conclusive, with different studies offering contradictory results, and often no differences found at all. Notwithstanding an almost universal exclusion of those with non-binary gender identity. Chen and colleagues point out that gender is a far from straightforward construct, which includes biological sex, psychological qualities, and gender-role attitudes. They point out that gender socialization theory argues that social factors or influences cause distinct moral developments in men and women; thus, men and women respond differently to the same situation. Another basic factor we might look at is whether age makes any difference to ethical decision-making, however, a similar problem is present with age as with gender. National and cultural characteristics Nationality is another factor; issues of nationality, ethnicity, and religion have therefore been of increasing interest to researchers of ethical decision-making, as one might expect, given the trends towards globalization. People from different cultural backgrounds are likely to have different beliefs about right and wrong, different values, etc., and this will inevitably lead to variations in ethical decision-making across nations, religions, and cultures. Research have suggested that nationality can have a significant effect on ethical beliefs, as well as views of what is deemed an acceptable approach to certain business issues. Geert Hofstede’s research has been extremely influential in shaping our understanding of these differences; he suggests that differences in cultural knowledge and beliefs across countries can be explained in terms of six dimension: - Individualism/collectivism: this represents the degree to which one is autonomous and driven primarily to act for the benefit of one’s self, contrasted with a more social orientation that emphasizes group working and community goals. - Power distance: this represent the extent to which the unequal distribution of hierarchical power and status is accepted and respected. - Uncertainty avoidance: this measures the extent of one’s preference for certainty, rules, and absolute truths. - Masculinity/femininity: the extent to which an emphasis is placed on valuing money and things versus valuing people and relationships. - Long-term/short-term orientation: this addresses differences in attention to future rewards, where long-term-oriented cultures value perseverance and thrift, while short-term ones emphasize more preservation of face, short-term results, and fulfilment of social obligations. - Indulgence: this measures the degree to which societies permit or suppress gratification of basic and natural human drives related to enjoying life and having fun. Hofstede’s dimension can be seen to explain certain differences in ethical decisionmaking; nevertheless, Hofstede’s framework remains open to vehement criticism by some who challenge the claim that national culture exists at all, and argue that the dimensions lack predictive power, that is, if you meet someone from Indonesia, who is to say that they will match Hofstede’s idea of what an Indonesian’s cultural dimensions should be? With the eroding of the territorial basis for business activities- exemplified by rising interna- tional trade, frequent international business travel, and growth in expatriate employment- the robustness and consistency of beliefs and values inherited simply from our cultural origin is likely to be increasingly weakened. Education and employment The type of education received by individuals, as well as their professional training and experience, might also be considered to be important individual influences on ethical decision-making. Individual values may shift as a result of exposure to particular working environments. Business training devoid of ethics can reinforce the idea that business is not expected to be concerned with questions of morality. Hence, although some aspects of individual morality may be developed through upbringing and general education, there is also a place for ethics training in enhancing people's ability to recognize and deal with ethics problems in the workplace. Overall, while the relationships between ethical decision-making and employment experience and education still remains somewhat unclear, some distinctions between those with different educational and professional experience seem to be present. Psychological factors Psychological factors are concerned with cognitive processes, in other words, how people actually think. From an ethical point of view, knowing about the differences in the cognitive processes of individuals can clearly help us to improve our understanding of how people decide what is the morally right or wrong course of action. The most prominent psychological factors are: Cognitive moral development Cognitive moral development: a theory explaining the different levels of moral reasoning that an individual can apply to ethical issues and problems, depending on their cognitive capacity. Lawrence Kohlberg developed the most common theory that have been utilized to explain these cognitive processes. He suggested three broad levels of moral development discerned by CMD theory: - Level one: the individual exhibits a concern with self-interest and external rewards and punishments - Level two: the individual does what is expected of them by others - Level three: the individual is developing more autonomous decision-making base on principles of rights and justice rather than external influences Moreover, Kohlberg identified two specific stages within each of the three levels, giving six stages of moral development altogether. Level 1  Preconventional  Stage 1: Obedience and punishment o Individuals define right and wrong according to expected rewards and punishments from authority figures. Stage 2: Instrumental purpose and exchange o Individuals are concerned with their own immediate interests and define right according to whether there is fairness in the exchanges or deals they make to achieve those interests. Level 2  Conventional  Stage 1: Interpersonal accord, conformity, and mutual expectations o Individuals live up to what is expected of them by their immediate peers and those close to them. Stage 2: Social accord and system maintenance o Individuals' consideration of the expectations of others broadens to social. accord more generally, rather than just the specific people around them. Level 3  Post-conventional  Stage 1: Social contract and individual rights o Individuals go beyond identifying with others' expectations, and assess right and wrong according to the upholding of basic rights, values, and contracts of society. Stage 2: Universal ethical principles o Individuals will make decisions autonomously based on self-chosen universal ethical principles, such as justice, equality, and rights, which they believe everyone should follow. CMD theory proposes that, as one advances through the different stages, one is moving to a 'higher' level of moral reasoning. The important thing to remember about CMD theory, however, is that it is not so much what is decided that is at issue, but how the decision is reached in terms of the individual's reasoning process. Two people at different levels could conceivably make the same decision, but as a result of different ways of thinking. All the same, Kohlberg argued that the higher the stage of moral reasoning, the more 'ethical' the decision. Thanks to the research, it can be argued that most people tend to think with level 2 reasoning. This implied that most of us decide what is right according to what we perceive others to believe, and according to what is expected of us by others. Although CMD theory has been very influential in the ethical decision-making literature, there have been numerous criticisms of the theory. It is worth remembering that the theory was initially developed in a non-business context, from interviews with young American males, hardly representative of the vast range of people in business across the globe, hence facing similar criticisms to those we noted in relation to Hofstede's national culture dimensions. The most notable criticisms are: - Gender bias: it is claimed that the theory is gender biased due to the emphasis Kohlberg put on his male subjects; it is also argued the women tend to employ an ethic of care in deciding what was morally right, emphasizing empathy, harmony, and the maintenance of interdependent relationships, rather than abstract principles. - Implicit value judgements: It is suggested tat CMD privileges rights and justice above numerous other bases of morality. - Invariance of stages: Kohlberg's contention that we sequentially pass through discrete stages of moral development can be criticized if we observe that people either regress in CMD or, more importantly, if they use different moral reasoning strategies at different times and in different situations. Despite these criticisms, CMD appears to be widely accepted as an important element in the individual influences on ethical decision-making. Locus of control The second psychological factor commonly identified as an influence on ethical thinking is locus of control. An individual’s locus of control determines the extent to which he or she believes that they have control over the events in their life. So, someone with a high internal locus of control believes that the events in their life can be shaped by their own efforts, whereas someone with a high external locus of control believes that events tend to be the result of the actions of others, or luck, or fate. In terms of ethical decision-making, Trevino and Nelson suggest that those with a strong internal locus of control might be expected to be more likely to consider the consequences of their actions for others, and may take more responsibility for their actions. Internals may also be more likely to stick to their own beliefs, and thus be more resistant to peer-group pressure to act in a way that violates those beliefs. However, there has not actually been a great deal of empirical research on the effects of locus of control on ethical decision-making in business. Overall, even among the individual factors, it would appear that locus of control has, at most, only a relatively limited effect on ethical decision-making. Personal values Personal values: individual beliefs about desirable behaviors and goals that are able stable over time and which influence decision-making. The most frequently cited definition is by Milton Rokeach who stated that a personal value is an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or endstate. Personal values have long been argued to be influential in the type of decisions we make in organizations; this is particularly true of ethical decisions, since values are key repositories of what we regard to be good/bad and right/wrong. People typically have more than 70 operative values, and even among these, some values will be more influential on behaviour than others. Researchers have found that, although individuals may espouse certain values, they also have a number of unconscious biases that shape their decision-making. Whatever the case, values are clearly an important aspect of ethical decision-making, and corporations are increasingly recognizing that they cannot simply ignore their employees' personal values in tackling ethical problems in their business. This kind of attention to values has been particularly evident at the level of corporate or organizational values. Many companies have attempted to set out what values their organization has, or stands for, and values statements and codes of conduct based on core organizational values have probably been the most common approaches to managing business ethics over the years. Personal integrity Personal integrity: an individual’s adherence to a consistent set of moral principles or values Whistleblowing: intentional acts by employees to expose, either internally or externally, perceived ethical or legal violations by their organization Integrity is typically seen as one of the most important characteristics of an ethical person, as such, it is no surprise that personal integrity has increasingly surfaced in relation to ethical decision-making, most particularly in relation to the behaviour of leaders. Although a variety of meanings are applied to integrity, the core meaning generally refers to integrity as consistency. The original meaning of the word 'integrity' is indeed concerned with unity and wholeness, and we can see that an adherence to moral principles essentially means that one maintains a consistency or unity in one's beliefs and actions, regardless of any inducement or temptation to deviate from them. Another way of looking at this is to consider integrity as being a matter of 'walking the talk', i.e., being consistent in word and action. Integrity frequently plays a central role in incidents of whistleblowing, which refers to acts by employees to expose their employers for perceived ethical violations. Although there are clearly various other factors involved, such acts of external whistleblowing often require the employee to maintain their personal integrity or commitment to a set of principles despite being confronted with numerous difficulties, obstacles, and opposition. This is because the organizational context within which individuals elect to blow the whistle can act as a powerful force in suppressing personal integrity in favor of the priorities and goals of the organization. Also, whistleblowers are often faced with á range of negative consequences for their actions. This includes victimization by colleagues or superiors as a result of their 'betrayal'; being passed over for promotion; job loss; even 'blacklisting' to prevent them getting another job in the same field. Acts of ethical decision-making where the consequences for the individual are so severe, are clarly driven by a considerable degree of personal integrity on the part of the whistleblower. But even more commonplace ethical violations, which have much less potential downside, require significant adherence to a set of principles in order for people to report them. Despite increasing attention to the importance of the issue of integrity, especially in the context of ethical leadership, most descriptive model of ethical decision-making have not tended to include it as a factor influencing how we decide in business eth