Managerial Ethics and Decision-Making

This set explores managerial ethics, including the three domains of human action, normative approaches to decision-making, levels of moral development, and theories of ethical behavior and corporate governance.

Ethics

The code of moral principles and values that governs the behaviours of a person, employees or groups in what is right or wrong.

Ethical issue

Present in a situation when the actions of a person or organization may harm some people but benefit others.

Codified law

The domain in which values and standards are written into the legal system and enforceable in the courts by lawmakers.

Domain of ethics

A domain with no specific laws that has standards of conduct based on shared principles and core values concerning moral conduct.

Domain of free choice

Pertains to behaviour about which the law has no guidance and for which an individual or organization enjoys complete freedom.

$2022$ CEO Compensation Ratio

CEOs were paid $344$ times as much as a typical worker, compared to $1965$ when they were paid $21$ times as much.

Ethical dilemma

A situation concerning right or wrong where values are in conflict and all alternative choices have potentially negative consequences.

Utilitarian approach

Espoused by Jeremy Bentham and John Stuart Mill, it holds that moral behaviour produces the greatest good for the greatest number.

Individualism approach

Contends that acts are moral when they promote the individual's best long-term interests, ultimately leading to honesty and integrity.

Moral-rights approach

Asserts that human beings have fundamental rights and liberties (such as privacy, free consent, and free speech) that cannot be taken away by a decision.

Justice approach

Holds that moral decisions must be based on standards of equity, fairness and impartiality, often applied through rules and regulations.

Distributive justice

Requires that different treatment of people not be based on arbitrary characteristics, such as ensuring men and women receive same salaries for the same job.

Procedural justice

Requires that rules be administered fairly, clearly stated, and consistently and impartially enforced.

Compensatory justice

Argues that individuals should be compensated for the cost of their injuries by the party responsible.

Practical approach

Bases decisions on prevailing standards of the profession and the larger society while taking the interests of all stakeholders into account.

Pre-conventional level

The first level of moral development where individuals are concerned with external rewards and punishments and obey authority to avoid personal consequences.

Conventional level

The level at which the great majority of managers operate, learning to conform to the expectations of good behaviour as defined by colleagues, family, and society.

Post-conventional level

Also called the principled level, reached by about $20\%$ of adults; individuals are guided by internal values based on universal principles of justice.

Rational choice theory

An explanation for unethical behaviour where actors weigh the chances of being caught against potential gains like power or status.

Strain theory

Suggests actors resort to misconduct when they are not able to achieve their goals, such as feeling pressure for short-term performance.

Moral seduction theory

A behavioral ethics theory where people are blinded to evil or convinced they acted ethically even if they did not.

Green punishment

Using penalties not just as punishment but to fund advancements in cleaner technology.

Ego strength

A personality measure of the strength of a person’s convictions, self-discipline, persistence, and taking accountability.

Internal locus of control

The belief that you control your own destiny and look at what you did wrong when evaluating outcomes.

External locus of control

The belief that what happens to you is due to chance or external circumstances, often leading to blaming the world.

School of Ethical Universalism

The view that common understandings across multiple cultures regarding right and wrong give rise to universal ethical standards.

School of Ethical Relativism

The view that differing beliefs and customs across countries give rise to multiple sets of standards, requiring the use of local standards.

Integrated Social Contracts Theory

A theory where universal (first order) ethical principles form a social contract, but cultures can specify locally ethical (second-order) actions.

Corporate Governance

An internal system of policies and processes that directs and controls management activities with objectivity, accountability, and integrity.

Agency theory

Concerned with resolving problems in relationships where goals are unaligned, specifically between shareholders (principal) and company executives (agents).

Stewardship theory

The view that managers, if left on their own, will act as responsible stewards of the assets they control.