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An Overview of the Ethical Decision Making Process in Business (Part 01)
Chandan Roy
Student of MBA (Major in Human Resource Management) Hajee Mohammad Danesh Science and Technology University Dinajpur, Bangladesh. 
By Chandan Roy
Published on 5 January 2013
An Overview of the Ethical Decision Making Process in Business. Definition of Ethics and Business Ethics. Importance of Ethical Business Decision.

An Overview of the Ethical Decision Making Process in Business

At first the author expresses his gratefulness to the Almighty, Who has helped him in pursuit of his education in MBA Program and for giving the strength to complete this term paper work.

The author expresses his heartfelt gratitude and indebtedness to his reverend course teacher Md. Kutub Uddin, Assistant Professor, Department of Management, Hajee Mohammad Danesh Science and Technology University, Dinajpur for his continuous inspiration, scholastic and systematic supervision, and invaluable advice, generous help for the completion of the work and in preparation of the manuscript.

The Author proud to express his gratefulness to respectable teachers Md. Zahangir Kabir (Chairman & Assistant Professor) and Rafia Akhtar (Assistant Professor) Department of Management, Hajee Mohammad Danesh Science & Technology University, Dinajpur for thir special encouragements in writing of this credible manuscript.

Cordial thanks are expressed to all of his friends and well wishers especially Sumon, Mortuza, Goutam, Nur-Alam for their co-operation and inspiration for the successful completion of the present study.

Finally, the author wishes to acknowledge his heartfelt indebtedness to his beloved parents and other family members for their patience, inspirations, sacrifices and blessings, without which this study would not have been possible.   
The Author


Serial No.    Particulars    Page No.
01    Acknowledgement    i
02    Index    ii
03    Introduction    1
04    Importance of ethical business decision    2
05    Ethics    3
06    What ethics is not?    4
07    Business Ethics    5
08    Decision making    7
09    Rational Decision Making Process    8
10    Ethical Issues in Business    9
11    Factor Influencing Ethical Decision Behavior    10
12    Approaches to ethical decision making    12
13    How to Make Business Decisions Ethical     14
14    Foundation and Sources of Ethical Business Decision    14
15    Ethical Decision Making Process    16-24
    A. A Framework for Ethical Decision Making    16
    B. Simplified model of Ethical Decision-Making Process    18
    C. Rational Ethical Decision-Making Process in Business    19
    D. Ethical Decision-Making Process by Ferrell    22
17    Conclusion    25
18    References    27


Ethical decision making is the study of identifying and choosing alternatives based on the ethical issues, values and preferences of the decision maker. Making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that (1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires, lifestyle, values, and so on.
In today's business and personal world, ethical decisions are made on a daily basis. Most of these decisions are based on company ground rules. The others are based on personal ground rules. All decisions can have a number of ground rules that help us determine whether our decision is ethical or unethical. Each decision whether it is based on company or personal ground rules will have its own set of implications.
Ethics is a standard that tells us how we should behave. It is based on moral duty and includes a code of values that guides our choices and actions. No person with a strong character lives without such a code. Ethics is more than doing what you must do. It is doing what you should do. Because acting ethically sometimes means not doing what we want to do, ethics is often an exercise in self-control. Ethics involves seeing the difference between right and wrong.
In daily work activities we are faced with issues that may include an ethical dimension. When we are considering a decision or course of action, either individually or as a team, it can be useful to ask questions that assist us to analyze the situation, and focus on possible moral and ethical outcomes. Ethical decision making models provide a framework to consider the facts, ethical principles, legal and policy framework and possible solutions to issues individuals are addressing.

Importance of Ethical Business Decision
a.    An ethical business decision assists to formulate of ethical business ideas and objectives that will maximize social, business and community welfare.
b.    It helps to develop social justice, equal and impartial decision, fair distribution of information about product, price as well as employment information between customers, businessmen, jobseekers.
c.    It helps an organization as well as government body to make fair tax policies, plans, business laws etc.
d.    Business that formulated its all decisions, procedures, dealings is attracted by the community people, customers, investors, suppliers. Total profit becomes high.
e.    Ethical business decision brings company goodwill which is an important asset for any kind of corporation.
f.    Man is basically animals without morality, social values, justice and care. Business ethics makes their behavior mutually beneficial when based on these.
g.    Students who become entrepreneurs, businessmen, traders and industrialists after their studies will keep in mind the lessons of the subject and surely will hesitate to bluntly harming others.
h.    The parties-at-interest in business by studying ethics will learn to behave the way with the transacting parties as they wish to get the same to themselves from other transactions.
i.    Governments and regulatory authorities and bodies will remain sensitive to the rightful and just expectations of the members of the public.
j.    Studying business ethics will help to identify ethical issues when arise they arise and recognize the approaches available for resolving them.
k.    Business ethics helps in moral and ethical decision making process. 


The word ethics comes from the Greek word ‘ethos` “meaning character or custom.” Today we use the word ethos to refer to the distinguishing disposition, character, or attitude of a specific people, culture or group (as for example, “the western ethos”, or “the business ethos”)

Ethics is “the branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of actions and the goodness and badness of motives and ends.”---Random House Webster’s College Dictionary

According to Robert C. Solomon, Professor of Philosophy, the etymology of ethics suggests its basic concerns;
1.    Individual character, including what it means to be “a good person,” and
2.    The social rules that govern and limit our conduct, especially the ultimate rules concerning right and wrong, which we call morality.

According to Skinner S J and Ivancevich JM-
“Ethics are the principles of behavior and distinguish between right and wrong.”
“Ethical conduct conforms with what a group or society as a whole considers right behavior.”

“The study of general nature of morals and of specific moral choices; moral philosophy; and the rules or standards governing the conduct of the members of a profession”.  - The American Heritage Dictionary.

Simply stated, ethics refers to standards of behavior that tell us how human beings ought to act in the many situations in which they find themselves-as friends, parents, children, citizens, businesspeople, teachers, professionals, and so on.

Ethics is a set of standards that tells us how we should behave. No person with strong character lives without a code of ethics.

•    Ethics is not the same as feelings. Feelings provide important information for our ethical choices. Some people have highly developed habits that make them feel bad when they do something wrong, but many people feel good even though they are doing something wrong. And often our feelings will tell us it is uncomfortable to do the right thing if it is hard.

•    Ethics is not religion. Many people are not religious, but ethics applies to everyone. Most religions do advocate high ethical standards but sometimes do not address all the types of problems we face.

•    Ethics is not following the law. A good system of law does incorporate many ethical standards, but law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas, and may be slow to address new problems.

•    Ethics is not following culturally accepted norms. Some cultures are quite ethical, but others become corrupt -or blind to certain ethical concerns (as the United States was to slavery before the Civil War). "When in Rome, do as the Romans do" is not a satisfactory ethical standard.

•    Ethics is not science. Social and natural science can provide important data to help us make better ethical choices. But science alone does not tell us what we ought to do. Science may provide an explanation for what humans are like. But ethics provides reasons for how humans ought to act. And just because something is scientifically or technologically possible, it may not be ethical to do it.

According to Skinner S J and Ivancevich JM, “Business ethics is the evaluation of business activities and behavior as right or wrong.” “Ethical standards in business are based on commonly accepted principles of behavior established by the expectations of society, the firm, the industry, and an individual’s personal values.”

Business ethics is guided by its corporate vision. For a non-profit organization, social welfare should come first than financial interest, for a corporate, first should consider the returns to its shareholders than social welfare. It differs as the aspect change. Every corporate should have a minimum level of social responsibility, though it’s a matter of debate to identify the share of support. Business also has to set a policy how it will behave to its rivals. How it will attack or counter-attack in the competition. Business also set a behavioral instruction about how it will try to influence the political environment to its favor. Beside these, almost every aspect of the business have ethical guideline to follow. Business ethics entails with-

Ethics of accounting information
- Accounting should always follow GAAP .
- Creative accounting or any misleading financial analysis should be prohibited.
- Corporate CEO and Top management should not get excessive payments, as it directly concern with the shareholders interest.
- Bribery and other unethical activities should be prohibited as those have direct bad effect on society.

Ethics of human resource management
- HR  department should not discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness.
- HR department should maintain a standard environment in workplace and should ensure the safety of the workers.

Ethics of sales and marketing
- Organization should not practice unethical behavior like spam marketing, price fixing by the group of sellers, offensive advertising, sex in advertising, marketing in school, black markets, grey markets, etc.

Ethics of production
- In production, several ethical issues should be considered. Organization should not produce defective product for getting higher profit margin.
-Production unit must consider environmental issues arise while production.
While testing a product, it should not violate the any law or rights. e.g.; animal rights.

Ethics of intellectual property, knowledge and skills
- All patent and copyright should be followed.
- While doing survey on the competition, no ethical values should violate.

Rooms of Business Ethics
Formulating Business Ideas and Objectives
Producing products and services
Product’s standard and quality
Fair dealing with customers
Advertising/ products promotion
Honest in exchange information with stakeholders
Making fair deal with suppliers
Hiring of employees without discrimination
Training programs
Compensation Planning
Safety and healthy working condition
Developing Govt. and non govt. tax policy
Fair profit allocation decisions
Community development