Ethical Theories Essay Example

ethical dilemmas arise at all levels of business. Therefore, the overall level of ethics in business depends on every individual's awareness and judgment when facing such situations. Hence, the field of business ethics covers not only financial or accounting irregularities involving billions but also moral and ethical questions encountered by workers in any organization. This discussion is categorized into three parts: (1) examining common moral philosophies utilized in business ethics; (2) presenting an established model for making ethical decisions in a business setting; and (3) investigating factors influencing individual ethical decision-making within a business context.

Table 1 demonstrates that the foundation of ethical decision-making in business is rooted in centuries of philosophical analysis. The major ethical philosophies, namely Teleology, center on the outcomes of actions (commonly known as "consequentialist" beliefs). This section provides a concise overview of each philosophy.

Two of the most widespread forms of teleological theories are egoism and utilitarianism. Egoism assesses the ethicality of actions by their impact on oneself, prioritizing self-interest above all else.

Egoists give precedence to the well-being of their physical, mental, and emotional states when dealing with ethical dilemmas. This can result in decisions that serve their personal interests in business contexts. While this may lead to unethical behavior, it is consistent with the principles of a free-market economy. Adam Smith, a political economist and advocate for unregulated free markets, contends that pursuing self-interest ultimately benefits society.

Renowned economist Milton Friedman supports the idea that businesses have a duty to generate profit and follow laws, but advocates of unrestricted commerce like Smith and Friedman recognize the necessity for limitations on individuals' self-interested tendencies. Ferrell, Fraedrich, and Ferrell's 2002 publication (p.57) provided Table

1 which outlines various approaches for incorporating ethics into business practices. The teleological approach to business ethics assesses actions as ethical or unethical based on their outcomes.

Three ethical frameworks exist for judging actions: Egoism focuses on the consequences to the self, preferring actions that maximize self-interest. Utilitarianism focuses on consequences to others, preferring actions that create the greatest good for the greatest number. Deontological ethics judge actions based on inherent rights of individuals and intentions of the actor, treating individuals as means, not ends.

The evaluation of justice actions focuses on the action itself rather than its outcomes, considering ethical or unethical based on the fairness demonstrated towards those involved. Such fairness can be assessed through distributive, procedural, and interactional approaches. On the other hand, relativism evaluates actions as ethical or unethical based on subjective factors that can differ among individuals, groups, and cultures.

Utilitarianism is an ethical reasoning approach that prioritizes the overall amount of good, or utility, generated by a decision or action. For instance, when companies relocate their production facilities to a different country, the utilitarian criteria considers the expected positive and negative consequences. If the benefits exceed the drawbacks, the move may be deemed ethical following utilitarianism. Additionally, this method includes what is known as cost-benefit analysis.

Assessing the costs and benefits of a decision, policy or action is necessary to determine its ethical nature. Such evaluation can consider economic, societal, humanitarian or emotional factors. If the total benefits outweigh the total costs, then the action is deemed ethical. However, accurately quantifying these costs and benefits has proven challenging and some have validly criticized that minority rights may be overlooked.

Utilitarianism and

egoism share the principle of assessing the moral value of actions based on their consequences. However, unlike egoism, utilitarianism prioritizes identifying the course of action that generates the best outcome for the largest number of individuals. Therefore, an action's morality is determined by its resulting ultimate good rather than by its intentions or itself. Notably, utilitarianism is widely accepted as the prominent ethical philosophy in business ethics because it acknowledges that certain actions may benefit some individuals while harming others. This perspective aligns with many decisions made within a business context.

Deontological ethics give precedence to (1) the rights of people and (2) the motives of those responsible for an act. Deontologists reject utilitarian viewpoints, as they support causing damage to some individuals in order to benefit others, while believing that every person deserves equal consideration and should not be used as a tool for achieving an end. According to deontology, ethical principles are constant and unchanging, and it is essential to follow these principles in order to behave ethically.

Many deontologists believe that individual rights are founded on "natural law" and the philosophy of Immanuel Kant, with justice being a primary concern in ethical theories prioritizing fairness and consistency according to legal or ethical standards. The philosopher John Rawls is strongly associated with justice-centered ethics.

To judge the fairness of an action, various rules such as distributive, procedural, and interactional ones are often invoked. Distributive justice is centered around the results that individuals receive and their attitudes toward these results. Procedural justice, on the contrary, is based on the procedures (guidelines, protocols, procedures) employed to achieve a resolution. Besides the results obtained, individuals evaluate the fairness

of these procedures. Finally, interactional fairness is related to the personal treatment one has when dealing with a decision-making process. Interactional fairness concerns how people are treated and regarded in making decisions.

Despite the emphasis on informational fairness and justifications for decisions in organizational behavior, there is still a lack of complete integration between justice perceptions and ethical theory. The reason for this is that while teleological, utilitarian, and justice theories are universal, relativism suggests that ethical principles vary among individuals or groups.

The concept of relativism challenges the idea that certain values are inherently better than others, acknowledging that moral codes and values may vary in different cultural and temporal contexts. This perspective is often captured by phrases like "When in Rome, do as the Romans do" or "What's right for one may not be right for another." In contrast, business ethics encompass various approaches to making ethical decisions, including James Rest's four-step model (also known as the four-stage model), which involves identifying ethical concerns, making moral judgments, intending to act ethically, and demonstrating ethical behavior.

Identifying the ethical aspect of a matter is the first step in applying ethical philosophy. Only after recognizing an ethical dilemma can one commence with making an ethical decision. There are variations among individuals in their consciousness and responsiveness to potential ethical issues.

The impact of various factors on an individual's ability to identify ethical dilemmas and form a moral assessment is explored in this section. The methods outlined in the ethical philosophy section can be utilized to arrive at such evaluations, which are also influenced by these same factors and ultimately affect moral or ethical intentions.

After reaching an

ethical judgment, the next step in decision-making is to decide on a behavior plan. This means determining what actions will or will not be taken regarding the ethical dilemma at hand. Research indicates that ethical judgments are highly indicative of behavioral intentions. However, situational factors may sometimes sway individuals from following through with their intended behavior, leading them to act otherwise. Ultimately, the focus is on ethical or moral behavior.

The last step in the ethical decision-making process is to take action in response to the ethical dilemma. Research suggests that people's behavioral intentions are a reliable indicator of their actual behavior, particularly when it comes to ethics. However, individuals may not always follow through on their moral judgments or intentions. This can be especially problematic in business settings where coworkers, supervisors, and company culture can sway people away from their ethical beliefs. The subsequent section of this essay delves into particular factors that impact the ethical decision-making process described above.

Factors that impact ethical decision-making in the business world can be categorized into three groups: individual difference factors, situational or organizational factors, and issue-related factors. Individual difference factors refer to personal qualities that affect ethical judgments. Situational or organizational factors influence the decision-making process. Issue-related factors also play a role. Research indicates that an individual's personal characteristics greatly impact their approach to ethical decision-making.

The idea of individual differences is primarily described by the concept of "cognitive moral development." Lawrence Kohlberg introduced this notion in the 1960s, and it was later developed by other experts. The theory aims to explain differences in ethical viewpoints among individuals regarding identical matters. It attributes these variations to one's level of

"moral development," which impacts their identification, evaluation, intention, and actions related to ethical issues. Additionally, the theory proposes that people experience different stages of moral development as they grow older.

Individuals in the "pre-conventional" level of moral development, typically young children or teenagers, assess ethical issues based on a desire to avoid punishment or gain personal benefits. This level comprises two stages.

Kohlberg stated that the stage of "conventional" development involves evaluating ethical problems by considering fairness to others and compliance with societal norms and standards. Individuals at this level rely on external authorities to establish what is right and wrong. Kohlberg observed that most grown-ups reason morally at this level, with the "principled" stage representing the highest level of moral development.

The cognitive moral development framework provides a compelling rationale for the variance in ethical reasoning between individuals and how they resolve ethical issues. The principled level is when an individual utilizes principles such as utilitarian, deontological, or justice to address ethical dilemmas. According to Kohlberg, a principled person prioritizes their personal beliefs over situational (organizational) expectations. This is applicable to business ethics since individuals with different levels of moral development may approach ethical issues differently due to situational (organizational) factors.

Contextual factors influence individuals' ethical issue recognition, judgment, and behavior. In the business ethics context, organizational factors such as the work group, supervisor, policies, procedures, codes of conduct, and culture can affect ethical decision-making. These factors may cause individuals to arrive at diverse conclusions regarding ethical issues than they would have independently. This section focuses on codes of conduct, which are formal policies, procedures, and enforcement mechanisms that outline the moral and ethical standards of the

organization.

A vital part of organizational codes of conduct is the inclusion of ethics codes, which serve as statements outlining an organization's norms and beliefs. These beliefs are often proposed, discussed, and defined by senior executives within the firm. The determined norms are then distributed throughout the firm. An instance from the code could be "This company forbids employees from accepting gifts worth more than $25 total from any business associate, and they must pay their full share for meals or other forms of entertainment."

Hosmer notes that ethical codes typically consist of negative statements because it is simpler to identify behaviors to avoid than to specify positive actions. Many big and small companies employ ethical codes with a threshold of $25 per individual. Nevertheless, ethics codes alone are inadequate in promoting ethical behavior. The incorporation of ethics codes into an underlying value system that pervades the organization's culture is necessary for maximum effectiveness.

For written codes of conduct to be effective, executives must genuinely commit to the expressed ideals. Inconsistency between behavior and the formal code significantly reduces its effectiveness. Ideally, the code should specifically address ethical issues in the industry or company and be subject to ethics training that focuses on likely employee dilemmas. Communication mechanisms are necessary for disseminating ethical standards and reporting perceived wrongdoing. Adequate investigations and punishment for ethical violations must also be ensured. Studies indicate that without rewards for ethical behavior and punishment for unethical behavior, written conduct codes are unlikely to be effective.

According to Thomas Jones' conceptual research in the 1990s and subsequent empirical studies, ethical decision-making processes in business are only triggered by ethical issues with a certain

level of "moral intensity". This means that individual and situational factors are unlikely to impact decision-making for issues perceived as minor. The moral intensity of an issue is determined by certain characteristics, with those having more serious consequences being more likely to reach the threshold level of intensity, according to research.

The ethicality of issues can prompt ethical decision-making processes, depending on societal agreement. Business ethics is a complex field that holds contemporaneous relevance to all business professionals. Though guidelines exist for effectual ethical decision-making, their benefits and drawbacks must be evaluated. By incorporating these guidelines, a businessperson can navigate towards the most ethical option within a given situation.