Chapter 8

Making Ethical Decisions in Business

This chapter sets forth a wide range of principles and methods for making ethical decisions.

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Realtors in the Wilderness Opening Case

1984 – Client represented by realtor Tom Chapman is offered $200 an acre by the National Park Service. Chapman forced the park service up to $510 an acre.

1992 – Chapman became an investor in TDX, bought 240 acres of inholdings, and coerced the U.S. Forest Service into swapping TDX for land that TDX sold for a huge profit.

1999 – TDX once again bullied the National Park Service into a bad deal near Black Canyon.

The story of TDX reveals an ethically complex situation. Its investors exercise basic property rights, but rights are not absolute. Their methods resonate with free market values, but markets exhibit flaws.

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Principles of Ethical Conduct

There are dozens, if not hundreds, of ethical principles in the philosophical and religious traditions of East and West.

The following 14 principles are fundamental guides or rules for behavior.

These principles distill basic wisdom that spans 2,000 years of ethical thought.

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The Categorical Imperative

Origination: Immanuel Kant Basic premise: Act only according to

that maxim by which you can at the same time will that it should become a universal law.

Criticism: Theory is dogmatic and inflexible.

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The Conventionalist Ethic

Origination: Albert Z. Carr Basic premise: Business is like a

game with permissive ethics and any action that does not violate the law is permitted.

Criticism: Commerce defines the life changes of millions and is not a game to be taken lightly.

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The Disclosure Rule

Origination: Baxter International’s Global Business Practice Standards

Basic premise: Test an ethical decision by asking how you would feel explaining it to a wider audience such as newspaper readers, television viewers, or your family.

Criticism: Does not always give clear guidance for ethical

dilemmas in which strong arguments exist for several alternatives.

An action that sounds acceptable if disclosed may not, upon reflection, be the most ethical.

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The Doctrine of the Mean

Origination: Aristotle Basic premise: Virtue is achieved

through moderation. Avoid behavior that is excessive or deficient of a virtue.

Criticism: The doctrine itself is inexact.

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The Ends-Mean Ethic

Origination: Ancient Roman proverb, but often associated with Niccolò Machiavelli.

Basic premise: The end justifies the means.

Criticism: In solving ethical problems, means may be as

important, or more so, that ends. The process of ethical character development

can never be furthered by the use of expedient means.

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The Golden Rule

Origination: Found in the great religions and in works of philosophy.

Basic premise: Do unto others what you would have them do unto you.

Criticism: People’s ethical values differ, and they

may mistakenly assume that their preferences are universal.

It is primarily a perfectionist rule for interpersonal relations.

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The Intuition Ethic

Origination: Defined by G.E. Moore in Principia Ethica.

Basic premise: What is good or right is understood by an inner moral sense based on character development and felt as intuition.

Criticism: The approach is subjective. Self-interest may be confused with ethical

insight. No standard of validation outside the individual

is used. Intuition may fail to give clear answers.

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The Might-Equals-Right Ethic

Origination: Thracymachus Basic premise: Justice is the interest

of the stronger. Criticism:

Confusion of ethics with force. Invites retaliation and censure, and is not

conducive to long-term advantage.

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The Organization Ethic

Origination: Not credited. Basic premise: Be loyal to the

organization. Criticism: Many employees have

such deep loyalty to an organization that it transcends self-interest.

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The Principle of Equal Freedom

Origination: Herbert Spencer Basic premise: A person has the right

to freedom of action unless such action deprives another person of a proper freedom.

Criticism: Lacks a tie breaker for situations in which two rights conflict.

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The Proportionality Ethic

Origination: Medieval Catholic theology

Basic premise: A set of rules for making decisions having both good and evil consequences.

Criticism: These are intricate principles, requiring consideration of many factors.

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The Rights Ethic

Origination: Western Europe during the Enlightenment

Basic premise: Each person has protections and entitlements that others have a duty to respect.

Criticism: Rights are sometimes stretched into

selfish demands or entitlements. Rights are not absolute and their limits

may be hard to define.

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The Theory of Justice

Originator: Contemporary, John Rawls. Basic premise: Each person should act

fairly toward others in order to maintain the bonds of community.

Criticism: Rawl’s principles are resplendent in theory and may even inspire some business decisions, but they are best applied to an analysis of broad societal issues.

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The Utilitarian Ethic

Origination: Line of English philosophers, including Jeremy Bentham and John Stuart Mill.

Basic premise: The greatest good for the greatest number.

Criticism: In practice it has led to self-interested

reasoning. Because decisions are to be made for the

greatest good of all, utilitarian thinking has led to decisions that permit the abridgement of individual or minority group rights.

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Reasoning with Principles

The use of ethical principles, as opposed to the intuitive use of ethical common sense, may improve reasoning, especially in complex situations.

Based on the application of utility, rights, and justice, the manager’s decision in the text example to remain silent is acceptable.

Some judgment is required in balancing rights, but the combined weight of reasoning with all three principles supports the manger’s decision.

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Character Development

Character development is a source of ethical behavior separate from the use of principles reasoning.

The theory that character development is the wellspring of ethical behavior can be called the virtue ethic.

Aristotle believed that by their nature ethical decisions require choice, and we build virtue, or ethical character, by habitually making the right choices.

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Practical Suggestions for Making

Ethical Decisions Learn to think about ethics in rational terms using

ideas such as universalizability, reversibility, utility, proportionality, or others.

Consider some simple decision-making tactics to illuminate alternatives.

Sort out ethical priorities early. Be publicly committed on ethical issues. Set an example. Thoughts may be translated into action, and ethical

deeds often require courage. Cultivate sympathy and charity toward others.

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Concluding Observations

There are many paths to ethical behavior.

Not all managers appreciate the repertoire of principles and ideas that exist to resolve the ethical problems of business life.

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