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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