Ethical Decision-Making Steps
1. Problem Recognition and Information Gathering
Identify the decisions and issues (ethical and otherwise) that are involved.
Is there something wrong personally, interpersonally, or socially here?
Identify the affected stakeholders and determine their interests, values and opinions.
Identify any legal requirements of the decision.
2. Identify Alternative Courses of Action
Brainstorm not only the obvious, and possibly conflicting, courses of action in the situation or ethical
dilemma, but to also think of a possible creative way to resolve the dilemma.
3. Evaluate Alternatives Courses of Action
Don’t forget that in most business situations, standard “business” criteria must be used to evaluate
alternatives (such as cost-benefit, net present value, sustainability, time to market, etc.) In addition to
these “business” criteria, one also wants to use the following ethical criteria to evaluate the decision.
Apply ethical evaluation criteria:
a) Which alternative respects the rights and dignity of the stakeholders and can be universally
applied?
For each decision alternative, identify the ramifications if everyone were to follow the principle
that underlies that alternative. For each decision alternative, determine if you are respecting the
stakeholders and not treating them merely as objects.
b) Which alternative will produce the most good and the least harm?
For each alternative, identify the cost/benefits. Weigh the cost-benefits of each alternative to each
stakeholder and determine if there is a solution that promotes the greatest good for the all of
people. (see Table 1)
If there is no alternative that results only in good and no harm, choose the alternative that
produces the most benefits and causes the least harm to the stakeholders.
c) Do any of the alternatives violate a conventional moral rule?
These are the types of rules that we find in many great religious traditions, such as rules against
killing, stealing, and lying. Others are more local and particular to specific cultures such as rules
about proper dress, relations between the sexes, respect for established authority, and so on. In
evaluating alternatives, you also want to consider if any of the alternatives are illegal.
Determining that an alternative is illegal should lead to its rejection.
d) Which alternative can you personally live with? For each alternative:
1. Will adopting this decision allow you to be at peace with yourself and develop your character
in a way that will improve your relationships with others?
2. How would you feel when you share your decision with your most respected mentors, family
members, or friends?
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3. How would you feel if your actions were reported on the front page of The Wall Street
Journal?
4. Estimate probabilities
In determining which decision making alternative to choose, you will have to weigh the results of the
different decision making criteria and estimate the likelihood that anticipated results may, or may not,
occur.
5. Calculate the Expected Values and Make a Decision
Compare the business criteria outcomes with the ethical criteria outcomes. For example, the dollar costbenefit analysis (business criteria) may be very positive, while the effects on certain stakeholders such as
employees or the community may be negative. One alternative may have the greatest financial benefit,
while another may seem to be the most ethical. The challenge is to find the alternative that produces the
most business value in an ethical way. The challenge is to find the alternative that produces the most
business value in an ethical way. (see Table 2)
6. Justify the Course of Action Chosen
Propose a convincing ethical decision. You need to be able to explain to others that you have weighed the
ethical issues involved and have made the most ethical decision possible. You also need to explain to
others that you have followed a process that is as ethical as possible.
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TABLE 11
IDENTIFYING CONSEQUENCES TO STAKEHOLDERS
Notes:
1. When identifying stakeholders think about owners, managers, customers, employees, suppliers,
different aspects of the community, the government, the natural environment, and of course stockholders.
Try to think as broadly as you can about possible stakeholders as you may also need to include future
generations and people who are one step removed from the immediate stakeholders.
2. Determine the relative level of importance of different stakeholders.
3. In thinking about consequences, you should focus on those consequences that have a particularly high
probability of occurring. In thinking about consequences make sure you look at both long-term and short
term consequences as well as real versus symbolic consequences (what message does your action send).
4. Finally, use your analysis to determine which decision alternative will produce the greatest good for the
greatest number of people.
1
Used by permission. Livingstone, J. (2003). A framework for ethical decision making. Wellesley, MA: Case
Development Center, Babson College, p. 31.
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TABLE 22
EVALUATION OF ETHICS OF PRELIMINARY DECISION
What is the total of all of your checked numbers? If your total is below 32 revisit your decision and
action-plan.
2
Ibid
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Beware of Your Biases 3
Throughout the decision-making process described above, be aware of the often subtle influences that
may affect your decision making. These subtleties are called biases; preferences or inclinations that may
inhibit impartial judgment. Here are some that may affect your perceptions and/or decisions:
Obedience to Authority
Beware of the temptation to rationalize decisions based on the notion that you are just following orders.
Many wrongs have been carried out using that excuse. If an action is inherently wrong or unethical, this
justification does not make the action ethical or right.
Social Proof
Not many parents succumb to the pleadings from their child based on the argument that, “Everyone else is
doing it.” Peer pressure can be great in all social situations – including the workplace. People are more
likely to undertake unethical actions in the workplace and elsewhere if peers are engaging in similar
behavior.
False Consensus Effect
This is the tendency to believe that other people think the same way that we do. Honest people have a
tendency to believe that those they interact with are also honest. This belief is often wrong. Employees
may get involved in some wrongdoing themselves but may not fully recognize the ethical implications of
their acts.
Over-optimism
“Humans are optimistic -- so much so that they often entertain irrational beliefs.” Even though the
divorce rate is at 50%, “newlyweds tend to rate their own chances of divorce at 0%.” Irrational optimism
can serve as a basis for unethical decisions. Over optimism can lead one to minimize potential bad effects
or to over estimate positive effects from a course of action.
Overconfidence
Related to over-optimism, “overconfidence in one's own ethical compass can lead people to accept their
own decisions without any serious moral reflection.” Psychological studies indicate that people tend to
rate themselves as well above average in most traits, including honesty. “People’s confidence in
themselves translates into confidence in the ethical correctness of their acts and judgments.”
Self-Serving Bias
The most important and most frequently occurring bias is the belief in deserved rewards for one's self.
The belief that you deserve the rewards that can result from a dubious act is often unconscious. Research
on self-serving bias suggests that a great number of ethical breaches in business situations arise from the
self-serving bias.
The self-serving bias also affects, often unconsciously, information that we may seek out to confirm
evidence – causing us to search out information that confirms rather than disconfirms evidence. This bias
also affects how we may remember information. “Studies show that people are more likely to recall
evidence that supports their point of view than evidence that opposes it. People involved in negotiations
tend to remember information that supports their bargaining position more than information that
undermines it.”
continued …
Quotations and summarizations compiled from article by Robert Prentice, (2004), entitled “Teaching ethics,
heuristics, and biases,” Journal of Business Ethics Education 1(1), 57 – 74.
3
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Framing
The context used to present an idea greatly affects perception. For example, “people's risk preferences
change dramatically depending on whether an option is framed in terms of potential loss or potential gain.
As a simple example of the impact of framing, people would rather buy potato chips labeled 75% fat free
than identical chips labeled 25% fat.” The self-serving bias may lead a person to frame decisions or
alternatives in such a way as to lead to problematic conclusions.
For example, instead of prosecuting legal cases on the basis of justice and fairness, some defense
attorneys and prosecutors often “keep score” of their “wins and losses.” “If a CEO frames his or her
responsibility only in terms of maximizing shareholder value, we should not be surprised to find that
those officers and directors are more likely to neglect such niceties as honesty, personal integrity, and
commitment to the mutual benefit of all the participants in the corporate enterprise.”
Process
“People sometimes make much different decisions depending upon whether they are presented with a
particular big decision, or a series of incremental decisions leading to the same point.” German doctors
who practiced euthanasia of "undesirables" during WW II might have initially just been brought to the
place where the work was done, next they were asked to sign a document, later to supervise a “mercy
killing,” and later asked to do the killing. “People involved in unethical business decisions more often
slide down a slippery slope incrementally and in tandem with their peers in an organization.”
Cognitive Dissonance
Once people have made decisions or taken positions, they will cognitively screen out information and
tend to reject that which undermines their decisions or contradicts their positions.
Sunk Costs
People tend to stick by decisions into which they have sunk significant costs – monetary or otherwise.
Sunk costs can lead to an escalating commitment. “Managers of companies that have poured huge
amounts of resources into a particular product will have great difficulty scrapping that product when
evidence of safety problems surface. The key point is that as individuals become used to having their job,
their salary, and their perquisites, their decision-making processes is affected more substantially than they
realize.”
The Tangible and the Abstract
Decision making considerations that are more removed from an individual in terms of time and space are
frequently considered less important than by more vivid, tangible, and current factors. Designers and
marketers of products with safety concerns find it extremely difficult to pull a product out of the market
(even a Ford Pinto or Vioxx) and lay off employees working on the product and damage the company's
profits in the short-term when the potential injuries are hypothetical, temporally-distant, and visited upon
“mere statistical victims.”
Time-Delay Traps
When an action has both short-term and long-term consequences, the former (short-term) are much easier
for people to consider. “People subject to this time-delay trap in decision-making often prefer immediate
to delayed gratification.” Illegally discarding and dumping pollutants into the environment is often a
short-term solution of significantly less cost financially to companies, but with greater long-term
damaging effects.
Loss Aversion
People detest losses more than they enjoy gains; about twice as much. For example, companies may
cover up damning evidence about unsafe products after safety problems have been detected (Merck and
the Vioxx recall).
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