Ethical Business Decision Making

It is reasonable that everyone who asks justice should do justice.

Thomas Jefferson

What Is Ethics?

Ethics has been a topic of discussion and debate starting with the Greek philosophers about 2,500 years ago. We can define ethics simply, but resolving ethical issues is rarely simple. Ethics is the study of good and of how people apply good principles in their behavior. Behavior includes how we treat people we know and, perhaps more importantly, how we treat people we do not know. Our biases and fears can complicate ethical decision making. Our own interests in achieving specific ends can also interfere with our choice of an ethical course of action; the ethical choice may not be the most profitable or socially acceptable.

It might be helpful to discuss what ethics is not. Ethics is not religion, although religion can guide ethical thinking. Ethics is not defined by what is possible (e.g., through scientific discovery or technology), although, as new machines are created, what is possible changes, giving rise to new ethical quandaries. Nor is ethics simply what is commonly practiced. Any one of us could cite a historically common practice that is unethical. In addition, what is common practice today in one place will conflict with what is common practice today in other places.

Ethics is not just how we feel: our instincts may tell us to act one way or another, but this feeling may not lead us to the best behavior. If making a public speech against a new piece of legislature were the only way to behave ethically following the passage of that legislature, would we take this action? Many people, for example, have a gut reaction against public speaking. The law is not an adequate guide either. Looking back at history, we can certainly name unethical laws.

An important outcome of ethical decision making is a standard for behavior. Standards can be informal, as in our behavior on the street, in a store, or with our neighbors. If you see someone drop a $20 bill, what should you do? Standards can also be formal, usually at the institutional level (e.g., at a university, trade organization, or business) or the societal level (city, county, state, national, international). At the societal level, for example, methods and forms of taxation must be determined. What means of taxation are ethical? Are there some that are unethical?

What Is Business Ethics?

Business ethics is ethics concerning behaviors occurring within a business context. The breadth of ethical considerations should be considered when one is formulating a standard of behavior in a business setting. We cannot look only to the law, only to common or prior practice, to religion, or to instinct. We must carefully consider multiple competing factors and, using logic and rational thought, create business standards of behavior that are ethical.

How Does a Business Provide Ethical Standards?

Businesses attempt to provide ethical standards in several ways:

  • relying on each individual to make ethical decisions
  • stopping at compliance with the law
  • simply telling employees and officers to act ethically

And some businesses achieve results by taking a managing values approach—a systematic approach to maintaining the organization's values that doesn't depend on individual interpretation of those values or how to safeguard them.

The first three options are not helpful even when an employee wishes to act ethically; the employee may not understand how to judge what is ethical behavior. Thus, determining if your company is using a managing values approach is the first step. Places to look to make this determination include your organization's mission statement, core values, and ethics code.

A fanciful depiction of ancient Greece and the “path” taken from mission statement, past core values, ethics code, ethics tests, and finally an explanation/defense of your ethical action plan.
Operational Ethics in a Business Setting

But what if these don't help, or worse, they raise ethical issues themselves? Fortunately, there is a set of standard ethics tests that you can apply yourself.

Ethics Tests You Can Apply

The first ethics test you can apply is called the front page test, or viral news test. This is a fairly new test, and it is simple: How would your business feel if the issue were on the front page of a newspaper? Or went viral on the internet?

More traditionally, there are five theoretical tests with which you can judge a business action (Markkula Center for Applied Ethics, n.d.):

  • rights—What duty do the actors have to respect the human rights of those affected?
  • justice or fairness—Are all parties treated equally or proportionally? If differently, is the basis for treating them differently rational?
  • virtues—The good human being is fair, is honest, shows integrity, and shows compassion. Does the action uphold these virtues?
  • common good—This test has become more common recently. How does the action benefit everyone in society? Whom does it not benefit? Whom might it harm?
  • utilitarianism—Utilitarianism is also called the greatest good principle. Does the overall good outweigh any bad? Sometimes, this conflicts with other tests.

In order to answer the questions above, we must have a clear sense of what is a good? What is a harm? What are legitimate rights? What is the standard of fairness? What is the canon of virtues? What is the common good? These questions have been much debated.

A Method of Determining Ethical Responsibility

There are five questions you can ask to determine whether or not you should act on a given decision:

  • What is the severity of the harm?
  • What is the certainty of the harm?
  • What is the degree of involvement?
  • What is the cost of acting?
  • What is the certainty of the solution?

Process of Ethical Analysis

Think of ethical analysis as a process that builds on itself. Follow the steps below, knowing that you might circle back and reevaluate your interpretation of the situation as you complete each step.

  1. Identify the stakeholders and determine whether some are more important than others.
  2. Determine whether all stakeholders have been consulted on the business decision at hand.
  3. Describe the possible actions of the stakeholders following the business decision
  4. Evaluate each of the possible business decisions in light of the ethical tests.
  5. Identify the best possible decision and justify your choice, with reference to the ethical approach on which you have based it.

References

Markkula Center for Applied Ethics. (n.d.). Ethical decision making. Santa Clara University. Retrieved from https://www.scu.edu/ethics/ethics-resources/ethical-decision-making/