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WHAT IS BUSINESS ETHICS?

Whenever people learn that I teach “business ethics,” they usually give me polite and respectful
responses.

1. Every so often, I get the “activist” response that questions how businesses can
sustain themselves because of their unethical behavior.
2. When people become more comfortable around me, they give me the “oh my
goodness, my boss is the most unethical person” story, and here, I have to brace
myself for what is another narration of narcissistic, self-seeking behavior gone
awry.
3. Not too frequently, I hear people asking me about how character and integrity are
related to remaining ethical in the workplace.

The truth is that “business ethics” is a concept that you are exposed to, even though you may not
necessarily speak the language of the discipline. As a manager in an organization, your main task
involves planning and executing the organization’s vision and mission under conditions of time
urgency, outcome uncertainty and a diversity of viewpoints. Accomplishing your managerial
responsibility requires the following steps:

1. To show sufficient appreciation of the issue, you need to listen to the manifold
perspectives of your subordinates, superiors, peers and external constituencies
2. To see the balance competing conceptions of the good, you must understand the
value of those perspectives that you disagree with,
3. To motivate others, you must capably articulate your ideas while incorporating
their inputs.

However, things are never this straightforward. Decisions that incorporate different perspectives
have to be made under time pressure, and you are never fully assured that your desired outcome
will come to pass. Your workplace may have policies and guidelines to guide your decision-
making, but rarely do they go far enough to help you throughout the process.

Business Ethics represents the unique setting where you can develop the necessary skills for
these kinds of situations. This class will expose you to various competing perspectives in a
complex business decision. In deciding, you will grapple with the limited amount of information
presented to you, the “validity” of all the perspectives being discussed, and the need to justify
your choice to your peers. The importance of this cannot be emphasized enough: managers are
hired to make difficult choices; there is no escape from this.

This note was prepared by Angelo Carlo S. Carrascoso, Associate Professor of Business Ethics, School of Business,
University of Redlands. It was written as a basis for class discussion rather than to illustrate effective or ineffective
handling of an administrative situation. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of the individuals mentioned above.
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THE ETHICAL FRAMEWORK DIMENSIONS

Our ethical decision-making class relies on a systematic way of appreciating and addressing the
many aspects of a given situation. On the one end, this systematic approach helps you see the
numerous ethical dimensions that you may not have previously noticed. However, remember
that ethical decision-making is not a mechanical, formulaic process; there is a lot of back and
forth that occurs as more information is disclosed and as we become more aware of the matters
at stake. In quite a few instances, our decisions change. As important, acceptable ethical
outcomes are never always guaranteed with the use of a framework; you can only hope to
sufficiently justify your decision to your key stakeholders and yourself.

Our framework considers the three main ethical categories that inform our decision-making.
Though influenced by various ethical theories, these categories capture the most relevant
perspectives in organizational decision-making:

1. Principles: Principles are traditionally understood in a deep, profound manner; a

“principled” person is steeped in tradition and will never change his or her decision
despite the changing context or situation. There is an element of non-negotiability and
permanence with this established definition. For our purposes, we will define
“principles” in a looser and broader manner to account for the diversity of valid
perspectives. Principles refer to decision motives i.e. why you did what you did in this
case. In arguing for your motive, you need to consider the other perspective’s validity
despite your significant opposition to it.
2. Consequences: We will consider consequences in the broadest way possible. As a
manager, you need to account for both the short-term and long-term positive and negative
effects of all relevant decisions on key stakeholders. These stakeholders have to be
identified beforehand, and their significance and effect on the firm assessed properly.
3. Character: Both principles and consequences refer to the decision being made. This
category brings the decision back to the decision-maker. It is a well-known fact that the
decisions we make over time have a significant influence over our character and integrity.
Some would even assert that we BECOME our decisions. Unfortunately, this person-
centered dimension is never fully accounted for when we decide. One of the long-term
effects of this oversight may be a rift between our personal and professional values. This
is extremely unfortunate because the good person is a good manager, and vice-versa;
there is no separation between these. Actively accounting for how the decision affects
you is one potent way of ensuring that this dichotomization does not occur.
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THE ETHICAL FRAMEWORK

These ethical dimensions are spelled out in greater detail using this six-step ethical framework.

1. Is this an Ethical Problem? Why or Why not?

What is the ethical problem? Remember that important ethical problems represent
dilemmas/conflicts between valid rights (hence Right vs. Right). A “Right vs. Wrong” problem
is not an ethical dilemma but a “temptation.” It does not require ethical analysis but moral
courage - the “right” must be pursued and the wrong avoided.

a. Consequences: Does the decision have significant consequences (both beneficial

and harmful) on key stakeholders – decision-maker, employee, community, etc. in the
short run and long run? Question 5 analyzes this further.

b. Character: Does the decision say a lot about one’s character and integrity, and if
one is living consistent with one’s values and the organization’s mission/vision
statements and other related documents? – Question 6 (The Five tests) assesses this
aspect.

c. Principles/values: Does this decision involve trying to balance conflicting values

and principles?

2. What is your decision?

As a manager, you are being trained to make a decision. At this stage in the framework, you
must make a decision. Note that it is preliminary and may change depending on the analysis you
undertake, and our class conversations.

3. What principles and values are in conflict?

Use this to determine the principles and values at stake with the decision. As much as possible,
you must go beyond the traditional shareholder/economic perspective of money and profits. You
must also consider what societal, economical, and moral principles and values are at stake.
Remember, we are determining what and how two rights are in conflict. For example, you must
see how making money AND doing good are equally good and equally valid motives for your
decisions.

Other examples of Right vs. Right dilemmas:

a. Truth vs. loyalty
b. Individual vs. community
c. Short-term vs. long-term
d. Justice vs. mercy
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4. What alternatives are available to the decision-makers in this case?

In every situation there are many alternatives. Even though we may only discuss two choices in
class, these are not the only ones. List every feasible, available alternative you can think of.
Some of these choices may not be legal, ethical, or right, but list and explain them for the sake of
argument.

In generating alternatives, you may use the following question: "What could make you change
your mind about your decision?" The answers to the question help you create alternatives that
you may not have initially conceived.

5. What are the short-term and long-term harms and benefits of your decision (and an
alternative)?

Decision-makers must account for the effects of their decision in as broad a manner as possible.
The following table illustrates how considering both the time horizon and the breadth and spread
of how people are affected allows you to appreciate the complexity of the decision-making
process.

While filing up the table is sufficient AS A FIRST STEP, you are expected to write your answers
up in full paragraphs for all written assignments.

Decision: Decision:
Relevant Harms Benefits Harms Benefits
Stakeholder Group

6. What is your final decision? Did it change in the process? How well does it address
the tests?

Make a final decision based on the additional research from items 3, 4, and 5. Did the decision
change from the one you made in number 2? Why or why not?

Note that this is where the character dimension gets explicitly discussed, especially test d.

a. Publicity: If this decision were made public and anyone on the planet could ask
you to justify your decision, what would your answer be? How would you defend the
answer to the public?
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b. ROLE Reversibility: If you exchanged changed places with the recipients of your
decision, could you still accept your decision? Is this a fair decision for everyone at
stake? Why?
c. Generalizability: Can you apply this decision to justify the decisions for other
future cases? How?
d. Mirror: Can you look yourself in the mirror after making your decision? Can you
tell your loved ones without deception that you made the right choice? Why?
e. Precedent: Can previous cases be used as basis for this decision? How?

PEDAGOGY
In terms of class format, we will significantly rely on the case study method: a student-centered,
participative form of pedagogy that intimately draws from your professional experiences to
enrich the class discussions. Since your main task is to make decisions, you must be exposed to
as many workplace ethical dilemmas as possible. Lectures are not done except to elaborate
certain important core concepts such as corporate social responsibility.

COURSE OUTCOMES
At the end of the class, you are expected to be more familiar with the intricacies of managerial
decision-making. In addition, I would like you to see how this process is applicable to your own
professional and personal decision-making.
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