Ethical Decision Making and Ethical Leadership

Ethical Decision Making and Ethical Leadership

Understanding the Ethical
Decision-Making Process

•       The first step in ethical-decision making is to recognize than an ethical issue requires an individual or work group to choose among several actions that various stakeholders inside or outside the firm will ultimately evaluate as right or wrong.

Framework for Understanding
Ethical Decision-Making in Business

Ethical Issue Intensity

•       Ethical issue intensity is the perceived relevance or importance of an ethical issue to the individual, work group, and/or organization.

–   Reflects the ethical sensitivity of the individual or work group and triggers the ethical decision process

•       Positive or negative incentives can affect the perceived importance of an ethical issue.

•       Employees need education regarding potential     problem areas.

Individual Factors

•      How people resolve ethical issues in their daily lives is often based on values and principles learned through family socialization.

•      In the workplace, ethical issues involve honesty, conflicts of interest, discrimination, nepotism, and theft.

•      The individual’s stage of cognitive development can affect conduct.

Individual Factors

•      Individual factors include:

–   Gender

–   Education

–   Work experience

–   Nationality

–   Age

–   Locus of control

Organizational Factors

•      Corporate culture: a set of values, beliefs, goals, norms and ways to solve problems that members (employees) of an organization share

–   Some corporate cultures support and reward unethical behavior.

–   Ethical climate is a component of corporate culture.

Ethical Climate

•      The character or decision processes used to determine whether actions are ethical or unethical

•      Consists of corporate codes of ethics, top management actions, ethical policies, coworker influence, and the opportunity for unethical behavior

•      The perceived ethics of the immediate work group has been found to be a major factor influencing ethical behavior.

Significant Others

•      The work group, which includes people such as peers, managers, and subordinates

•      Help on a daily basis with unfamiliar tasks and provide advice and                                              information formally                                                     and informally

•      Have more influence                                                       on daily decisions                                                       than any other factor

Obedience to Authority

•      An aspect of influence that significant others can exercise

•      Helps us explain why many employees resolve business issues by simply following the directives of a superior


•      Relates to permitting ethical or unethical behavior

•      Rewards and punishment play a key role

•      Relates to the employee’s immediate job context

•      Can be eliminated by establishing                 formal codes, policies, and rules                       that are enforced

Items That Employees Pilfer
in the Workplace

Business Ethics Evaluations
and Intentions

•      Ethical dilemmas involve decision rules which are often vague or in conflict.

•      Critical thinking plays a key role.

•      A person’s intentions along with the final decision on what action to take is the last step in the ethical decision-making process.

•      If intentions and behavior are not consistent with ethical judgments, the individual may feel guilt.

•      Most businesspeople will make ethical mistakes.

The Role of Leadership in
Corporate Culture

•       Leadership is the ability or authority to guide and direct others toward achievement of a goal.

•       Leaders are key to influencing an organization’s corporate culture and ethical posture.

•       Leadership styles influence many aspects of organizational behavior, including employees’ acceptance of and adherence to organizational norms and values.

The Role of Leadership in
Developing an Ethics Plan

Leadership Styles

•      Coercive leaders

•      Authoritative leaders

•      Affiliative leaders

•      Democratic leaders

•      Pacesetting leaders

•      Coaching leaders


•      The most successful leaders do not rely on one style of leadership but alternate their technique based on the characteristics of the situation.

Types of Leaders

•       Transactional leaders attempt to create employee satisfaction through negotiation, or bartering for desired behaviors or levels of performance.

•       Transformational leaders strive to raise employees’ level of commitment and to foster trust and motivation.

•       Transformational ethical leadership is best suited for organizations that have higher levels of ethical commitment among employees and strong stakeholder support for an ethical culture.

Habits of Strong Ethical Leaders

•              Ethical leaders have a strong personal character.

•              Ethical leaders have a passion to do right.

•              Ethical leaders are proactive.

•              Ethical leaders consider stakeholders’ interests.

•              Ethical leaders are role models for the organization’s values.

•              Ethical leaders  are transparent and actively involved in organizational decision-making.

•              Ethical leaders are competent managers who take a holistic view of the firm’s ethical culture.