Chapter 3
Deciding What’s Right: A Psychological Approach
Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)
1. Chapter Outline
2. Teaching Notes
3. In-Class Exercises
4. Homework Assignments
5. Additional Resources
Chapter Outline
I. Introduction
II. Ethical Awareness and Ethical Judgment
III. Individual Differences, Ethical Judgment, and Ethical Behavior
A. Ethical Decision-Making Style
B. Cognitive Moral Development
a. Level 1: Preconventional
b. Level 2: Conventional
c. Level 3: Postconventional
d. Are Men and Women Different?
e. Looking Up and Looking Around
f. Autonomous Principled Thinking and Action
C. Locus of Control
a. Relationship to Ethical Judgment and Action
D. Machiavellianism
E. Moral Disengagement
IV. Facilitators of and Barriers to Good Ethical Judgment
A. Thinking about Fact Gathering
B. Thinking about Consequences
a. Reduced Number of Consequences
b. Consequences for Self vs. Consequences for Others
c. Consequences as Risk
d. Consequences over Time: Escalation of Commitment
C. Thinking about Integrity
D. Thinking about Your Gut
a. Your Gut – “Automatic” Ethical Decision Making
E. Unconscious Biases
F. Emotions in Ethical Decision Making
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V. Toward Ethical Decision Making
A. Revisiting the Pinto Fires Case: Script Processing and Cost-Benefit Analysis
a. Script Processing
B. Cost-Benefit Analysis
VI. Conclusion
VII.
Exercise: Understanding Cognitive Moral Development
VIII.
Discussion Questions
Teaching Notes – Discussion Questions
1. Steven F. Goldstone, Chairman and CEO of RJR Nabisco (one of four biggest U.S.
cigarette manufacturers), said in a magazine interview, “I have no moral view of this
business. . . I viewed it as a legal business. You shouldn’t be drawing a moral judgment
about a business our country says is perfectly legal and is taxed like crazy by it.” (Might
need to be sourced.) Think about Goldstone’s statement in terms of moral awareness.
What might happen, if he began thinking about his business in moral and not just legal
terms?
Possible Answer
The leaders of the tobacco companies have worked hard to keep from thinking about their
companies’ product in moral terms. If they do not think about it in moral terms, they do not have
to engage moral judgment processes. When forced by others to think in moral terms, they tend
to talk about individual choice -- the individual adult’s right to smoke in a free country. They
ran into serious problems with the public and the government, however, when it became apparent
that they were aiming advertising at teenagers.
As was discussed in Chapter 1, this strict focus on the law is unacceptable. The law simply does
not cover all ethical and social responsibility expectations of corporations. Companies that wish
to stay out of trouble need to think beyond the law. They need to keep their fingers on the pulse
of society. The disclosure rule can be helpful here. How would a particular practice play on the
front page of the New York Times?
2. Evaluate yourself in terms of cognitive moral development and locus of control. What does
this tell you about your own ethical decision making? Do the same for someone you know
well.
It is actually difficult for people to accurately evaluate themselves or others on cognitive moral
development, with the small amount of information provided in the chapter. Information about
obtaining a measure of cognitive moral development is provided below. But, this question does
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provide an opportunity for thought and self-reflection. A measure of locus of control is provided
below.
Probes to Stimulate Discussion

“What do you think about, when faced with an ethical dilemma: whether you will be caught
and punished? What significant others would think and do in the same situation? Or, what
kind of world it would be, if everyone took a particular action?” (Most of our MBAs
generally acknowledge that they and those they have worked with are at the conventional
level of cognitive moral development.)
3. Can you think of a time when you have used morally disengaged thinking?
It should be easy for students to think of times, when they have heard others use morally
disengaged thinking.
Before teaching about moral disengagement, it can be revealing to give students examples of
situations (see three examples below) and ask them how they are likely to act in them. Then, ask
them to list the reasons why one might, or might not, do these things. Many of the reasons they
generate for doing them, will match the moral disengagement mechanisms. The following
examples would probably work best with undergraduates.

You work in a fast-food restaurant. It is against policy to eat food without paying for it.
You came straight from classes and are therefore hungry. Your supervisor is not around,
so you make something for yourself and eat it without paying.

Your accounting course requires you to purchase a software package that sells for $50.
Your friend, who is also in the class, has already bought the software and offers to lend it
to you. You take it and load it onto your computer.

You are preparing for the final exam in a class, where the professor uses the same exam
in both sections. Some of your friends somehow get a copy of the exam after the first
section. They are now trying to memorize the right answers. You do not look at the exam,
but just ask them what topics you should focus your studying on.
4. Identify a situation in which you have used script processing in a work or other life
situation.
Most students find it difficult to really “get” this notion of scripts. So, it is helpful to discuss
examples from real work settings. Be sure to emphasize that scripts only apply in “routine”
situations. Think of them as “standard operating procedures” that one learns to use in these
routine situations. For example, the triage system emergency room personnel use can be thought
of as a script for deciding which patients get attention first, second, and so on.
5. Do you believe that scripts can override an individual’s values system?
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Possible Answer
Obviously, this question asks for an opinion. But, the truth is that they can. And, Denny's
personal reflections provide a great example of this. Denny had strong values and beliefs related
to business' responsibility to society. And he probably believed that he was being true to those
values and beliefs. But, he needed some set of guidelines for making the tough decisions of a
recall coordinator. These had evolved in the context of the corporate decision environment and
the scripted guidelines excluded ethical considerations. This issue hints at something discussed
in Chapter 7 - multiple ethical selves.
It may also be important to note that Denny was quite young, when he was given this
responsibility. But, he also did not make recall decisions alone. He was part of a group that
made “recommendations” to a higher level management group that would decide on the recall.
So, the script became an important guide for decision making for the entire group.
Probe to Stimulate Discussion

"Can you think of an example of a situation, where a script overrode your value system?"
6. Answer the question posed in Gioia’s Reflections: Is a person behaving unethically, if the
situation was not even construed in ethical terms – if there was no moral awareness?
Probes to Stimulate Discussion

“Is it appropriate to say, ‘I hadn't thought of this in terms of right and wrong - I employed a
structured way of thinking about the situation and that's why I missed the ethical overtones?’
"
Sure, it helps to understand one’s behavior, but it does not necessarily excuse it. The action was
still unethical. Obviously, Denny does not think now that he did the right thing, although he
seems to understand why he behaved the way he did.

“How autonomous can we expect people in organizations (ourselves) to be? “

“Whose responsibility is it to decide that a situation involves ethical concerns?”
Here is the relevant quote from Denny's personal reflections in the text:
The recall coordinator's job was serious business. The scripts associated with it
influenced me more than I influenced [it]. Before I went to Ford, I would have
argued strongly that Ford had an ethical obligation to recall.
After I left Ford, I now argue and teach that Ford had an ethical obligation to
recall. But, while I was there, I perceived no obligation to recall and I remember
no strong ethical overtones to the case whatsoever. It was a very straightforward
decision, driven by dominant scripts for the time, place, and context.
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(An overhead with this quote on it can stimulate a lengthy discussion).
7. Who should make the decision about taking risks with others' lives in designing products?
Possible Answers
Engineers, marketing people, top managers, government regulators, consumers? This is an
important question about responsibility in organizations and is related to topics treated later in
the book - chapters 7 and 9. When responsibility is diffused among a variety of people, there is
more of a tendency to ignore the potential harm that a product might cause, unless organizational
decision making systems are explicitly designed with this concern in mind. So, one way to deal
with this is to consider ways to get every individual, who makes decisions related to new
products, to consider their potential harm; n other words, to embed risk assessment into the
decision making process, similar to environmental impact statements that are becoming a regular
part of corporate reports. Ultimately, someone high in the organization must make the final
decision. But, if information about risk and potential harm is included in reports provided to top
decision makers, they are less likely to ignore or downplay these problems. It is also important
that these decision makers be aware of the biases that affect the way they are likely to think
about risk. They should design risk analysis into decision-making processes and ask questions
like, what is the worst-case scenario? Another consideration is to have the people making the
product release decision be different from those, who are already highly invested in the product's
success. They are likely to be more objective in their decision making.
This is also an appropriate time to consider again the role of government regulation. Arguably,
government safety standards have evolved, because businesses did not create standards, stringent
enough to satisfy the public interest. But, in the Pinto Fires case, the car met all safety
regulations in effect at the time.
Students’ attitudes toward government regulation often differ, depending upon the role they take
-- businessperson or consumer. It can be effective to have students take these different roles in
the discussion.
8. Should a person be permitted to place a value on a human life? Should a company?
Should the government? If not, how would decisions be made about whether to market
certain products (that might be risky for some, but helpful for others), how much those who
have lost family members in disasters should be compensated, and so on?
Possible Answers
Again, there are more questions than answers. The question is designed to get students thinking
and we have had many lively discussions around the issues raised by this question. Some
students are inclined to answer this question with a simple "no." But, it is not that easy. As a
society, we make decisions about the risk we are willing to take with human life all the time.
Certain medical procedures and medications have the risk of serious harm or death attached to
them. Traveling in automobiles, trains and airplanes does kill people. We could build cars to
protect us better in car accidents and fewer people would die, but we do not, because of cost and
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competitiveness issues. In some cases, people decide to give one life more value than another, as
when a fetus is aborted to save the life of the mother, or one person is selected over another to
receive an organ transplant. So, we do make these decisions. How do we do it? Is it better to
use a moral reasoning approach, or some intuitive or "gut" approach than to place a dollar value
on human life? Do the approaches presented in Chapter 4 help? Perhaps the most important
question is -- who should be making these decisions?
9. How do you feel about the use of cost/benefit analysis, where human life is part of the cost
calculation? Might the infusion of moral language have changed the decision makers’
thinking? For example, what if decision makers had talked about their responsibility for
killing 180 human beings?
Possible Answers
This is a question about how students "feel" and is designed to provoke thought and discussion.
An argument for using cost-benefit analysis might be that dollars and cents are simply the ways
we place value on things in this society. So, why not human life? It forces us to think about what
human life is really worth to us. However, an argument against it might be that the value of a
human life simply cannot be captured by such a crude measure. It is like trying to measure love
in dollars and cents. If adults tried to do a dollar-based, cost-benefit analysis on the decision to
have children, they probably never would. Although there are many benefits, they cannot be
captured by a dollar figure.
It is clearly harder to make a decision to “kill” people. For that reason, it may be very
appropriate to use this kind of language. At least we would be morally aware and we would be
making our decisions with our eyes wide open.
Probes to Stimulate Discussion

"If we do not use some form of cost-benefit analysis, what do we use?"
10. Given that all automobiles are unsafe to some degree, where do you draw the line on
product safety? How safe is safe enough – and who decides?
Possible Answers
Students have difficulty with this one. But, again, it makes them think about the complexity of
these issues, and they usually acknowledge the importance of product safety regulation to protect
consumers.
Probes to Stimulate Discussion

“How many of you drive Volvos? If not, why not?” (Volvos are thought to be among the
safest cars on the road, but one does not see many.)
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In-Class Exercises
Exercise #1: Another Short Case for Discussion
Mary, the director of nursing at a regional blood bank, is concerned about the
declining number of blood donors. It is May, and Mary knows that the
approaching summer will mean increased demand for blood and decreased
supplies, especially of rare blood types. She is therefore excited, when a large
corporation offers to host a series of blood drives at all of its locations,
beginning at corporate headquarters. Soon after Mary and her staff arrive at
the corporate site, Mary hears a disturbance. Apparently, a nurse named
Peggy was drawing blood from a male donor with a very rare blood type,
when the donor fondled her breast. Peggy jumped back and began to cry. Joe,
a male colleague, sprang to Peggy’s defense and told the male donor to leave
the premises. To Mary’s horror, the male donor was a senior manager with
the corporation. What is the ethical dilemma in this case, and what values are
in conflict? How should Mary deal with Peggy, Joe, the donor, and other
representatives of the corporation?
The values in conflict are Peggy’s right to be treated with dignity and respect, and the rights of
those, who will need blood in the coming months. If Mary blows the whistle on the male donor
(senior manager), she may be concerned about jeopardizing future blood donations.
Mary should talk with Peggy about her experience. She may need counseling from the
organization’s Human Resources Department or Employee Assistance Program.
Mary should also praise Joe for taking quick action in Peggy’s defense.
Peggy should discuss the incident with someone in the corporation’s ethics office or human
resources department. This behavior may be part of a pattern and, if so, it would be important
for them to know about the incident, so they can take action. Most large corporations would
consider this kind of incident to be quite serious, especially if this executive is acting similarly
with their own employees. Peggy could save the company from future legal problems by
alerting them to the problem. At the very least, this individual should be barred from future
blood donations.
Exercise #2 – Relativism/Idealism Scale (Forsyth, 1980)
The statements below are about your general philosophies. Please circle the number that
indicates how much you agree or disagree with each item, IN GENERAL.
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Strongly
Disagree
Strongly
Agree
Neither
1) A person should make certain that their actions never intentionally
harm another even to a small degree.
1
2
3
4
5
6
7
2) Risks to another should never be tolerated, irrespective of how
small the risk might be.
1
2
3
4
5
6
7
3) There are no ethical principles that are so important that they
should be a part of any code of ethics.
1
2
3
4
5
6
7
4) What is “ethical” varies from one situation and society to another.
1
2
3
4
5
6
7
5) The existence of potential harm to others is always wrong,
irrespective of the benefits to be gained.
1
2
3
4
5
6
7
6) Whether a lie is judged to be moral or immoral depends upon the
circumstances surrounding the action.
1
2
3
4
5
6
7
7) Questions of what is ethical for everyone can never be resolved
since what is moral or immoral is up to the individual.
1
2
3
4
5
6
7
8) If an action could harm an innocent other, then it should not be
done.
1
2
3
4
5
6
7
9) Deciding whether or not to perform an act by balancing the
positive consequences of the act against the negative consequences of
the act is immoral.
1
2
3
4
5
6
7
10) Rigidly codifying an ethical position that prevents certain types of
actions could stand in the way of better human relations and
adjustment.
1
2
3
4
5
6
7
11) One should never psychologically or physically harm another
person.
1
2
3
4
5
6
7
12) One should not perform an action which might threaten in any
way the dignity and welfare of another individual.
1
2
3
4
5
6
7
13) No rule concerning lying can be formulated; whether a lie is
permissible or not permissible totally depends on the situation.
1
2
3
4
5
6
7
14) Dignity and welfare of people should be the most important
concern in any society.
1
2
3
4
5
6
7
15) Moral standards should be seen as individualistic; what one
person considers to be moral may be judged to be immoral by another
person.
1
2
3
4
5
6
7
8
16) Moral actions are those which closely match ideals of the most
“perfect” action.
1
2
3
4
5
6
7
17) If an action could harm an innocent other, then it should not be
done.
1
2
3
4
5
6
7
18) Different types of moralities cannot be compared as to
“rightness.”
1
2
3
4
5
6
7
19) Moral standards are simply personal rules which indicate how a
person should behave, and are not to be applied in making judgments
of others.
1
2
3
4
5
6
7
20) Ethical considerations in interpersonal relations are so complex
that individuals should be allowed to formulate their individual codes.
1
2
3
4
5
6
7
To score:

Add scores from statements 1, 2, 5, 8, 9, 11, 12, 14, 16, and 17. The sum represents the score
on the idealism scale.
 Add scores from statements 3, 4, 6, 7, 10, 13, 15, 18, 19, and 20. The sum represents score
on the relativism scale.
Total possible score on each scale = 70
Exercise #3 – Locus of Control
Students can have a difficult time understanding why locus of control is important. An easy way
to help them understand this is to focus on the characteristics at the internal and external ends of
the spectrum.
Internal Locus of Control:
 More likely to help someone
 More likely to question you and authority in general
 In charge of their own fate
External Locus of Control:
 Follows orders and rules
 Less likely to question you and authority in general
 Very much influenced by peer pressure
 Less likely to see how they (their role) can effect an outcome
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Begin a discussion about why locus of control might be important, when you are hiring someone
to do a specific job. The point: locus of control has implications for how people behave on the
job and it is good to think about this.
For example: How might locus of control figure into:
 Hiring an assembly line worker?
 Hiring a nanny?
 Choosing a doctor?
 Naming someone to head a compliance function?
 Selecting a nuclear power plant engineer?
 Promoting someone in the military?
Exercise #4: Locus of Control Questionnaire
Another interesting exercise to encourage students to consider their own locus of control is to
administer this questionnaire in class. Then have the students score their own – you can use a
paper survey, use slides to ask each question, or even use an online survey program to collect the
results and then feed them back during class.
Locus of Control Questionnaire
Instructions: Please read each pair of statements, (a) and (b). Then select which statement you
agree with more. Check either (a) or (b) for each pair of statements.
1. ____ a) Many of the misfortunes people experience are partly due to bad luck.
____ b) People's misfortunes usually result from the mistakes they make.
2. ____ a) In the long run people get the respect they deserve.
____ b) Unfortunately, an individual's worth is often unrecognized, no
matter how hard he or she tries.
3. ____ a) Grades in school are generally a fair representation of the
student's effort and ability.
____ b) Most students do not realize the extent to which their grades are
influenced by accidental happenings.
4. ____ a) Without the right breaks one cannot be an effective leader.
____ b) Capable people who fail to become leaders have not taken advantage of
their opportunities.
5. ____ a) No matter how hard you try, some people just do not like you.
____ b) People who cannot get others to like them, do not understand how to get
along with others.
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6. ____ a) I have often found that what is going to happen will happen.
____ b) Trusting to fate has never turned out as well for me, as making a
decision to take a definite course of action.
7. _ ___ a) If a student is well-prepared, there is rarely, if ever, such a thing as an unfair test
____ b) Many times exam questions tend to be so unrelated to course work
that studying is really useless.
8. ____ a) Getting a good job is a matter of hard work. Luck has little or nothing to do with it.
____ b) Getting a good job depends mainly on knowing the right people.
9. ____ a) The average citizen can have an influence in government decisions.
____ b) This world is run by the few people in power, and there is not much
the average person can do about it.
10. ____ a) When people succeed, it is usually because they worked hard for it.
____ b) When people succeed, it is often because they were in the right
place at the right time.
Scoring
Instructor: Note that this is not a validated measurement instrument. It has been adapted from a
variety of other instruments and is designed for instructional use only. The purpose is to
familiarize students with the locus of control concept - not to measure an individual's locus of
control. We recommend asking students to identify which statements refer to an external
orientation and which statements refer to an internal orientation. Then discuss how this
orientation might influence ethical conduct. I = internal E = external
1. ____ a) Many of the misfortunes people experience are partly due to bad luck. (E)
____ b) People's misfortunes usually result from the mistakes they make. (I)
2. ____ a) In the long run people get the respect they deserve. (I)
____ b) Unfortunately, an individual's worth is often unrecognized, no matter how hard he or
she tries. (E)
3. ____ a) Grades in school are generally a fair representation of the student’s effort and ability.
(I)
____ b) Most students do not realize the extent to which their grades are influenced by
accidental happenings. (E)
4. ____ a) Without the right breaks one cannot be an effective leader. (E)
____ b) Capable people who fail to become leaders have not taken advantage of their
opportunities. (I)
5. ____ a) No matter how hard you try, some people just do not like you. (E)
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____ b) People who cannot get others to like them, do not understand how to get along with
others. (I)
6. ____ a) I have often found that what is going to happen will happen. (E)
____ b) Trusting to fate has never turned out as well for me as making a decision to take a
definite course of action. (I)
7. ____ a) If a student is well-prepared, there is rarely, if ever, such a thing as an unfair test. (I)
____ b) Many times exam questions tend to be so unrelated to course work that studying is
really useless. (E)
8. ____ a) Getting a good job is a matter of hard work. Luck has little or nothing to do with it
(I)
____ b) Getting a good job depends mainly on knowing the right people. (E)
9. ____ a) The average citizen can have an influence in government decisions. (I)
____ b) This world is run by the few people in power, and there is not much the average
person can do about it. (E)
10. ____ a) When people succeed, it is usually because they worked hard for it. (I)
____ b) When people succeed, it is often because they were in the right place at the right
time. (E)
Additional Resources
1. Cognitive Moral Development:
Materials for measuring cognitive moral development using the Defining Issues Test can be obtained
from the Center for the Study of Ethical Development, University of Alabama
305a Carmichael Hall, Tuscaloosa, AL 35487
Phone: 205-348-4571
2. Moral Disengagement
A measure of moral disengagement (particularly useful with undergraduates) can be found in an
article by Detert, J.R., L.K. Treviño and V. Sweitzer. 2008. “Moral Disengagement in Ethical
Decision Making: A Study of Antecedents and Outcomes.” Journal of Applied Psychology. 93:
374-391.
3. Video: Pinto Fires
Linda Treviño and Dennis Gioia have created an instructional DVD to accompany his “Pinto Fires”
case and reflections (Chapter 3).
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For years, Denny has taught the case to MBA business ethics classes as a "living case." It has
always been a big hit with the students, to be able to interact with Ford's recall coordinator himself
and ask questions left hanging in the case.
The DVD includes an introduction by Linda Treviño, Denny Gioia teaching the MBA class (edited
to about 45 minutes), and some closing learning points by Denny. We also created titled vignettes
that an instructor can pick and choose to make specific points in a shorter time period. That seems to
work best. The case is packaged with the DVD, along with a brief instructor's guide and suggested
readings.
We have priced the DVD at a reasonable cost, so that it will be accessible to any instructor who
would like to use it. Proceeds are being split between Penn State University's Media Sales and the
Shoemaker Program in Business Ethics Endowment that supported creation of the DVD.
Linda Treviño would be glad to answer any questions you have about using the DVD, which she has
used successfully in several teaching settings. The link to Penn State Media Sales, where you can
purchase the DVD is below:
http://mediasales.psu.edu, or call: 814-865-3333
To find the “Pinto Fires” DVD, see the banner, third from the top, on the right.
4. Videos: ABC News
You can purchase the following videos or DVDs at the ABC News Store: www.abcnewsstore.com
 “What Would You Do?” A series of video tapes that explore what people might do in various
hypothetical cases. Cases vary and include subjects such as shop lifting and domestic
violence.
 “Basic Instincts” – the Milgram experiments revisited.
5. Video and Podcast: Nova’s “Mind Over Money”
Nova’s “Mind Over Money” is a fascinating exploration of how emotions and the way the brain
works affect out behavior. Specifically this program shows how traders get so caught up in the game
of trading that their ethics and ability to assess risks is compromised. Here is a link to the website:
http://www.pbs.org/wgbh/nova/money/
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