AB0630 Business Gone Green

September 5/6, 2016

Session # 05

Ethical Reasoning

Joseph CY Wan
acywan@ntu.edu.sg

Ethics and Sustainability

Ethics address questions regarding what is right,
just or fair.
Managers decisions can have powerful impacts on various
stakeholders including shareholders, employees,
customers, suppliers, the public, and so on.

Sustainability (i.e., making choices to improve the

firms competitive advantage) and ethical reasoning
(i.e., making choices that benefit rather than harm
stakeholders) are intertwined.
According to Hosmer (1994), incorporating ethical
reasoning in strategic planning helps to build trust on the
part of all of the stakeholders of the firm. Trust generates
commitment and, in turn, cooperative effort that can
enhance the firm performance.
Hosmer, L. T. (1994) Strategic planning as if ethics matter. Strategic Management Journal, 15, 17-34.

Reflection

What is Ethics ?

Chambers dictionary,

Ethics is a set of
moral principles and
beliefs about
right and wrong
3

Reflection

What is Moral ?

Having to do with
character or behaviour,
especially right behaviour
- Chambers dictionary

Reflection

What is right behaviour ?

To whom ?

By whom ?

For whom ?

Reflection

What would you do in the following situation ?

An O ring in the mechanical working of an
engine is not to be used at below zero degrees.
The launch of a spacecraft was scheduled to
begin, while the temperature was below zero
degrees.
You immediately notified your superior, who
informed his superior and finally the order from
the highest authority (non-technical) was to go
ahead. What would (or could) you do?

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Reflection

What would you do in the following situation ?

You discovered that your top sales person, who is
bringing in about 1/3 total sales for the company
is receiving kick-backs from one of the
distributors.

Kick-backs is a rather common practice in that

particular country of operations.
Expel the sales person and lose 1/3 of total sales
or keep an eye close and pretend nothing
happens since it is a common practice?
8

The Business Times, Monday, September 17, 2012

Reflection

Reflection

Morality arises from ...

Responsibilities to ...

10

Society (Public)
Consumers
Employees
Physical Environment

Reflection

Are Ethical Theories Useful ?

Utilitarian
Egoism
Self

11

Society

Kantian
Universal

Reflection

Egoism

Pertains to self-interest
- what is good for the self
is good enough

12

Reflection

Kantian
Central thesis is that consequences
of actions are not the primary
considerations in deciding what ought
to be done.
Rather, obligations,
responsibilities and
considerations of justice and
fairness take precedence
13

Reflection

Utilitarian Ethics

Takes the consequences of an

action to be of paramount
importance.

One ought to act so as to bring about the

best consequences one can for everyone
affected by the action.
14

Reflection

The Golden Rule

Do unto others
as you would have them
do unto you

15

Reflection

The Silver Rule

Dont do unto others
as you wouldnt have them
do unto you
Morality requires that you do not
make an exception of yourself, that
you do not engage in practices or
follow rules that you could not
recommend to everyone.
16

What is Ethical Reasoning?

Ethical reasoning is the process of consciously reasoning about

what is right or wrong and, thus, helps a manager to decide
how to act in a given situation. Ethical reasoning involves at
least the following steps of deliberation:
1. Recognize the ethical issue.
2. Identify the relevant stakeholders affected by the ethical issue
(or the action(s) that it entails).
3. Ethical principles are moral standards that are used to analyze
whether the action(s) is ethical to the relevant stakeholders.
Assess the impact of the action(s) on the stakeholders.
4. Make a decision after analyzing trade-offs among stakeholders.

Your Ethical Reasoning

Assignment:
Some guidelines:
1. Recognise the ethical issue
2. Identify the relevant stakeholders affected by the
ethical issue (or the actions that it entails)
3. Ethical principles are moral standards that are used
to analyze whether the action(s) is/are ethical to the
relevant stakeholders. Assess the impact of the
action(s) on the stakeholders.
4. Make a decision after analyzing the trade-offs
among stakeholders.
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1. Recognize Ethical Issue

An ethical issue is a situation, problem or
opportunity that requires a choice among actions
that must be evaluated as right or wrong, ethical
or unethical (Ferrell, Fraedrich & Ferrell, 2008).
Examples of Ethical Issues
Is it ethical to close down a plant and move it
overseas?
Is it ethical to offer something of value to a potential
customer so as to increase the probability of the
customer selecting the firm as its provider?
Ferrell, O.C., Fraedrich, J. & Ferrell, L. (2008). Business Ethics: Ethical decision making and cases. Mason, OH: SouthWestern Cengage Learning.

2. Identify Relevant Stakeholders

Stakeholders refer to those groups that are affected by and can in turn affect
the achievement of the organizational objectives of the firm. They include:
Organizational Stakeholders
People working within the boundaries of the firm (include high-level and
lower-level employees).

Product-market stakeholders
Parties with whom the firm shares its industries such as customers,
suppliers and distributors.

Capital-market stakeholders
Groups which provide capital resources (and will affect cost of capital to
the firm) such as shareholders, banks and other financial intermediaries.

Social stakeholders
External parties that may be affected by or can influence the firms
strategy and performance such as governments, unions and social
activists.

3. Ethical principles to analyze whether the action is

ethical, and impact on stakeholders (I)

Self-interests

Never take any action that is not in the long-term self-interests of

yourself and/or of the organization to which you belong

Personal Virtues

Never take any action which is not honest, open and truthful, and
which you would not be proud to see reported widely in national
newspapers and on network news programs

Religious Injunctions

Never take any action that is not kind and compassionate, and that
does not build a sense of community, a sense of all of us working
together for a commonly accepted goal

Government
Requirements

Never take any action that violates the law, for the law represents the
minimal moral standards of our society

Utilitarian Benefits

Never take any action that does not result in greater good than harm
for the society of which you are a part.

C.f. Hosmer, L.T. (1994). Strategic planning as if ethics matter. Strategic Management Journal, 15, 17-34.

3. Ethical principles to analyze whether the action is

ethical, and impact on stakeholders (II)

Universal Rules

Never take any action that you would not be willing to see others,
faced with the same or a closely similar situation, also be free or
even encouraged to take

Individual Rights

Never take any action that abridges the agreed-upon and accepted
rights of others

Economic Efficiency

Always act to maximize profits subject to legal and market

constraints, for maximum profits are evidence of the most efficient
production

Distributive Justice

Never take any action in which the least among us are harmed in
some way

Contributive Liberty

Never take any action that will interfere with the right of all of us
for our self-development and self-fulfillment to the limit of our
abilities

C.f. Hosmer, L.T. (1994). Strategic planning as if ethics matter. Strategic Management Journal, 15, 17-34.

4. Make a Decision after analyzing

Trade-offs

Application of different ethical principles to the action(s)

involved in the ethical issue may not lead to a consistent
conclusion.
When this happens, one has to analyze the trade-offs
and then make a judgment.

Individual Ethical Reasoning Assignment 15 marks

Each student is to submit a (maximum) 3 page ethical reasoning submission.

Specific details on your ethical reasoning exercise will be given by next week
(Session 06 Sept 13)
The report will be double spaced, with 1 inch margins on all four sides, and typed
with either Times New Roman or Arial font of size 12. Submit your written report
using the TurnItIn function in NTULearn. The deadline for submission will be at
11.59 pm on October 14, 2016. (Session 09)
In addition, you are required to submit a declaration that the work produced was
not plagiarised. The declaration should be included at the end of your submission
and will not count as part of the formatting requirements.
Please follow the format of the below mentioned declaration statement:
I, <insert student name>, declare that this assignment is my own work, unless
otherwise referenced, as defined by the NTU policy on plagiarism. I have read the
NTU Honour Code and Pledge. http://www.ntu.edu.sg/home/yclai/
Signed. Date .