Approaches to Ethical Decision Making Notes

Chapter 3: Approaches to Ethical Decision Making

Ethical Decision Making Framework

The ethical decision-making framework involves a structured approach to ensure ethical actions. The steps include:

1. Gather the Facts: Collect all relevant information, including laws, regulations, policies, and procedures.

2. Determine the Ethical Issue(s): Identify the core ethical dilemmas.

3. Identify Those Impacted: Determine all stakeholders affected by the decision.

4. Explore Possible Solutions and Actions: Brainstorm and consider various courses of action.

5. Consider Ethical Principles, Responsibilities, and Penn State Values: Evaluate the options against established ethical guidelines.

6. Take Ethical Action: Implement the chosen solution.

1. Recognize/Determine an Ethical Issue

Key questions to identify ethical issues:

• Could this decision damage someone or some group?

• Does this decision involve a choice between a good and bad alternative?

• Is this issue about more than what is legal or what is most efficient? If so, how?

2. Gather the Facts

Important considerations for gathering facts:

• What are the relevant facts of the case?

• What individuals and groups have an important stake in the outcome? Why?

• What are the options for acting?

• Have all the relevant people and groups been consulted?

• Evaluate Alternative Actions

3. Explore Possibilities & Actions: Evaluate the Options

Ethical approaches to evaluate options:

• Teleology/Utilitarian Approach: Which option will produce the most good and do the least harm?

• Rights Approach: Which option best respects the rights of all who have a stake?

• Deontology Approach: Which option follows the rules, act, duty, and obligation?

• Justice & Fairness Approach: Which option treats people equally or proportionately?

• Virtue Approach: Which option leads me to act as the sort of person I want to be?

4. The Impact of the Decisions

• Make a Decision and Test It

• Considering all these approaches, which option best addresses the situation?

• Act and Reflect on the Outcome

• How can the decision be implemented with the greatest care and attention to the concerns of all stakeholders?

• How would the decision turn out, and what would be learned from this specific situation?

Stakeholder Impact Analysis

When facing an ethical problem, corporate and professional codes of conduct should be the first resource for guidance.

• However, these codes often don't specifically apply to the problem. In such cases, decision-makers can use general ethical principles within a framework to arrive at a defensible ethical decision.

• This framework is known as Stakeholder Impact Analysis (SIA).

Stakeholder Impact Analysis Details

• Modern corporations are accountable to shareholders and non-shareholder groups (stakeholders).

• Freeman (1984): A stakeholder is anyone who is affected by or can affect the objectives of the organization.

• A company cannot reach its full potential if it loses the support of one of its stakeholders.

Map of Corporate Stakeholder Accountability

Stakeholders include:

• Employees

• Political groups

• Suppliers

• Trade associations

• Financiers

• Communities

• Trade unions

• Competitors

• Customers

This represents the stakeholder theory view of the firm.

Stakeholder Accountability (Cont'd)

• Modern corporations are realizing that shareholders include individuals and institutional investors interested in longer-term time horizons and ethical business conduct.

• Ethical investors and stakeholder groups believe in managing the corporation on a broader basis than short-term profit only.

• Maximizing profit in a longer time frame requires harmonious relationships with most stakeholder groups and their interests.

• Corporations recognize their increasing accountability to stakeholders, beyond just legal and practical accountability to shareholders.

Fundamental Interests of Stakeholders

• Well-offness: The proposed decision should result in more benefits than costs.

• Fairness: The distribution of benefits and burdens should be fair.

• Right: The proposed decision should not offend the rights of the stakeholders and the decision-maker.

• Virtuosity: The proposed decision should demonstrate virtues reasonably expected.

All four interests must be satisfied for a decision to be considered ethical.

Measurement of Quantifiable Impacts

• Profit: Is fundamental to the interests of the shareholders.

• A short-term measure and that several important impacts are not captured in the determination of profit - can be corrected in two sections.

  • Items not included in profit: Measurable directly.

  • Items not included in profit: Not measurable directly.

Items Not Included in Profit: Measurable Directly

• Example: When a company pollutes, the cost of cleanup is usually absorbed by individuals, companies, or municipalities.

• These costs are referred to as externalities.

• Their impacts can often be measured directly by the costs of cleanup incurred by others.

Items Not Included in Profit: Not Measurable Directly

• Other externalities exist where the cost is included in the determination of the company’s profit, but where the benefit is enjoyed by persons outside of the company.

• Examples:

  • Donation and scholarship – the benefit cannot be measured directly.

  • Loss of health suffered by people absorbing pollution – the cost cannot be measured directly.

• However, they should be included in an overall assessment.

Items Not Included in Profit: (cont’d)

• It is possible to measure these impacts directly through the use of surrogates or mirror image alternatives.

• Example:

  • Scholarship – a surrogate for the benefit could be the increase in earnings gained by the recipient.

  • Loss of health – the value could be estimated as the income lost plus the cost of medical treatment plus the loss of productivity in the workplace involved as measured by the cost of fill-in workers..

Assessment of Non-Quantifiable Impacts

1. Fairness among stakeholders

   • A decision will only be considered ethical if its impacts do not offend the rights of the stakeholders impacted upon, and the rights of the person making the decision.

2. Rights of Stakeholders

Traditional Decision-Making Approaches

1. Traditional 5-Question Approach

2. Traditional Moral Standards Approach

3. Traditional Pastin Approach

Traditional 5-Question Approach: Graham Tucker

This approach involves the examination or challenge of a proposed decision through the five questions:

• Is the decision…

  • …profitable? (Shareholders’ – usually short-term)

  • …legal? (Society at large – legal enforceable rights)

  • …fair? (Fairness for all)

  • …right? (Other rights of all)

  • …going to further sustainable development? (Specific rights)

• Stakeholder interest examined.

Traditional Moral Standards Approach: Valesquez

This approach offers a framework that is more suited to the consideration of decisions which have significant impacts outside the corporation.

Traditional Pastin’s Approach

This approach examines the four key aspects of ethics.