Ethics in decision making

No contemporary discussion of decision making would be complete without the inclusion off ethics because ethical considerations should be an important criterion in organizational decision making. This certainly is more true today than at any time in the recent past given the scandals at companies like Enron, WorldCom, Tyco International, Arthur Andersen, Citigroup, Merrill Lynch, ImClone Systems, Adelphia Communications., Sunbeams and Rite Aid. In this final section, we present three different ways to frame decisions ethically and look at how ethical standards vary across national cultures.

Three Ethical Decision Criteria:

An individual can use three different criteria in making ethical choices. The first is the utilitarian criterion, in which decisions are made solely on the basis of their outcomes or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number. This view tends to dominate business decision making. It is consistent with goals like efficiency, productivity, and high products. By maximizing profit, for instance a business executive can argue he is securing the greatest good of the number as he hands out dismissal notices to 15 per cent of his employees.

Another ethical criterion is to focus on rights. This calls in individuals to make decisions consistent with fundamental liberties and privileges asst forth in documents like the Bill of Rights. An emphasis on rights in decision making means respecting and protecting the basic rights of individuals such as the right to privacy to free speech and to due process. For instance, use of this criterion would protect whistle blowers individuals who report unethical or illegal practices by their employer to outsiders when they reveal unethical practices by their organization to the press or government agencies on the grounds of their right to free speech.

A third criterion is to focus on justice. This requires individuals to impose and enforce rules fairly and impartially so that there is an equitable distribution of benefits and costs. Union members typically favor this view. It justifies paying people the same wage for a given job, regardless of performance differences, and using seniority as the primary determination in making lay off decisions.

Each of these three criteria has advantages and liabilities. A focus on utilitarianism promotes efficiency and productivity, but it can result in ignoring the rights of some individuals, particularly those with minority representation in the organization. The use of rights as a criterion protects individuals from injury and is consistent with freedom and privacy, but it can crate an overly legalistic work environment that hinders productivity and efficiency A focus on justice protects the interest of the underrepresented and less powerful, but it can encourage a sense of entitlement that reduces risk taking, innovation and productivity.

Decision makers, particularly in for profit organizations, tend to feel safe comfortable when they use utilitarianism. A lot of questionable actions can be justified when framed as being in the best interest of ‘the organization’ and stockholders. But many critics of business decision makers argue that this perspective needs to change. Increased concern in society about individual rights and social suggests the need for managers to develop ethical standards based on non-utilitarian criteria criterion. This presents a solid challenge to today’s managers because making decisions using criteria such as individual rights and social justice involves far more ambiguities than using utilitarian criteria such as effects on efficacy and profits. This helps to explain why managers are increasingly are increasingly criticized for their actions. Raising prices, selling products with questionable effects on consumers on consumer health, closing down inefficient plants, laying off large numbers of employees, moving production overseas to cut costs, and similar decision can be justified in utilitarian terms. But that may no longer be the single criterion by which good decisions should be judged.

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