3. Ethical Dilemas.pptx

Ethical Dilemmas, Sources & Resolution
Dr. Bansari Dave

What is Ethical Dilemma?
An ethical dilemma is a moral situation in which a choice has to be made
between two equally undesirable alternatives.
• Dilemmas may arise out of various sources of behaviour or attitude, as for instance, it may
arise out of failure of personal character, conﬂict of personal values and organizational goals,
organizational goals versus social values, etc.
• A business dilemma exists when an organizational decision maker faces a choice between two
or more options that will have various impacts on (i) the organization’s proﬁtability and
competitiveness; and (ii) its stakeholders.

The Structure of Ethical Dilemma
Either Doing what is
morally right Results in
A bad outcome
or
bad effects
Or
Doing what
is morally
wrong
Results in
Good or at least
better effects or
outcome

How Ethical Dilemmas in Business Affect the Stakeholders?
SHARE HOLDER
EMPLOYEE SOCIETY
Ethical dilemmas in business can best be explained by the above triangle with the
stakeholders as its vertices. The stakeholders in this case can be broadly classified
into shareholders, employees and the society at large.

Corporate Dilemma Over Ethics
People in business come across several ethical problems that
cause ethical dilemmas. For instance,
• They feel that there is lack of clear linkage between
business ethics and financial success;
• They are not clear as to how much they should invest in
the business ethics system;
• They are unclear about the right balance between
business ethics and the investment required for the same;
and
• The seemingly long gestation periods and the lack of short
term gains, also, is an obstacle.

Sources of Ethical Problems
I. Failure of Personal Character
People whose personal values are not desirable may embezzle funds, steal
supplies from the company, pad expense accounts, take unjustified leave, shirk
obligations to fellow-workers, take bribes for favouring suppliers use inside
information for their personal benefit and to the detriment of others.

II . Conflict of Personal Values and Organizational Goals:
The company uses methods or pursues goals unacceptable to the manager.
Reported case: George Couto, an employee of Bayer AG, exposed that Bayer AG used to
re-label Cipro and sell it to another pharmaceutical company, Kaiser Permanente, with a
different identification number so that it could claim more money from the Medicaid
programme.

III. Organizational Goals Versus Social Values
Activities of a company taken as unethical by the stakeholders, due to changing social scenario
or milieu.
Procter and Gamble withdrew its Rely tampon promptly when its use was linked statistically to
some deaths and Johnson & Johnson cleared all retail shelves of its Tylenol analgesic within
days of the discovery that some containers have been poisoned.

IV. Personal Beliefs Versus Organizational Practices
Ethical dilemmas in organizations arise when they employ multi-racial
and multi-religious employees. Several organizations are accused of
racial discriminations and gender bias in the work place and have
been paying fines of billions of dollars or opting for out-of-court
settlements.

V. Production and sale of hazardous but popular products
Where does the ethical burden lie, when business sells products known to be actually
or potentially harmful to society?
Is the principle of caveat emptor in mercantile law to be adapted suitably?
Should individual rights and free choice override social costs?

V. Production and sale of hazardous but popular products (Contd.)
Could drunken drivers and carefree smokers deprive others of their legitimate rights to life
and safety?
Could free trading in hard drugs, dynamite and guns be considered ethical?
Will the ineffective control ‘Smoking is Injurious to Health’ and that too given as a
‘Statutory’ warning legitimatize the unethical business?

VI. Other Ethical Challenges
• Price fixing and profiteering due to monopoly, and often by artificially created
scarcity.
• Shifting unfair shares to the producer stakeholders and employees.
• Discriminatory wage structure.
• Using up too fast, scarce and irreplenishable industrial resources and raw
materials.
• Shifting or locating business at the cost of society.
• Overworking women and children.

Why do Businesses have such a
Negative Image?
Competitive pressures, individual greed and differing cultural contexts generate
ethical issues for organizational managers. Further, in almost every
organization some people will have the inclination to behave unethically (the
ethical egoist) necessitating systems to ensure that such behavior is either
stopped or detected (after unethical behavior occurs) and remedied. Ethics,
involves systematizing, defending, and recommending concepts of right and
wrong behavior.

Why Should Businesses Act Ethically?
There are a number of reasons why businesses should act ethically:
• to meet stakeholder expectations (and protect the former’s reputations),
• to prevent harm to the general public,
• to build trust with key stakeholder groups,
• to protect themselves from abuse from unethical employees and
competitors,
• to protect their own employees, and
• to create an environment in which workers can act in ways consistent
with their values.

How Corporates are Observing Ethics in Their
Organization?
Organizations have started to implement ethical behavior by the following
actions:
• publishing in-house codes of ethics
• employing people with a reputation for high standards of ethical behavior at the
top levels
• starting to incorporate consideration of ethics into performance reviews
• Starting to reward ethical behavior
• conducting an ethics audit

Code of Personal Ethics for Employees
Most company codes list the following values being expected from
their employees:
• Respect confidential information to which you have access.
• Maintain high standard of professional responsibility.
• Avoid being placed in situations involving conflict of interest.

Code of Personal Ethics
for Employees (contd.)
Most company codes list the following values being expected from their
employees.
• Act with integrity.
• Do not be biased against anybody or anything.
• Maintain professional relations based on mutual respect for
individuals and organizations.
• Be committed to the goals of the organization.
• Do not give up your individual professional ethics.

Walton’s Six Models of Business Conduct
To understand business conduct, Walton has classified them into six models
(i) The Austere Model
It gives almost exclusive emphasis on ownership interest and profit objects

(ii) The Household Model
Following the concept of an extended family, the model emphasizes employee
job, benefits and paternalism.
(iii) The Vendor Model
In this model, consumer interests, tastes and rights dominate the organization.

(iv) The Investment Model
This model focuses on the organization as an entity and thus on long-term profits and
survival. In the name of enlightened self-interest, it gives some recognition to social
investments along with economic ones.
(v) The Civic Model
Its slogan is ‘corporate citizenship’.
It goes beyond imposed obligations, accepts social responsibility and makes a positive
commitment to social needs.

(vi) The Creative Model
This model encourages the organization to become a creative instrument,
serving the cause of an advanced civilization with a better quality of life.
The employees perform as artists, building their own creative ideas into
actions, resulting in new contributions not originally contemplated.
The above six models may be thought of as points on a continuum from low
to high social responsibility.
Result: Employees be become proud of performance, and develop a sense of
belonging and creativity.

Regardless of the model adopted by an organization, one of its most important jobs is to
establish and blend its value together so that they become a consistent, effective system
that is known and accepted by the fair primary claimant groups – investors, employees,
customers and society, including the government.
The system must be strong enough to withstand changes by partisan pressure groups, but
flexible to move with the changing society.

How to Resolve a Dilemma?
Ethical? Unethical?
 Is a policy, a decision or an action

Ask Three Questions
To resolve these questions that create a dilemma, ask three questions
• Utility: Do the benefits exceed the cost (Share Holder)?
• Rights: Do they respect human rights (Society)?
• Justice: Does it distribute benefits and burdens evenly
(Employees)?

How to Resolve
Ethical Dilemmas?
Two basic approaches are possible in resolving ethical dilemmas:
deontological and teleological
Deontological (action-oriented) approach:
An ethical standard consistent with the fact that it is performed by a rational
and free person.
These are inalienable rights of human beings and reflect the “characteristic
and defining features of our nature”.
These fundamental moral rights are inherent in our nature and are
universally recognized.

Teleological (results-oriented) ethics:
The moral character of actions depends on the simple, practical matter of the
extent to which actions actually help or hurt people. Actions that produce
more benefits than harms are “right”; those that don’t are “wrong”.
Center for Ethics and Business offers “a brief, three-step strategy” in which
both the deontological and teleological approaches converge
• STEP 1: Analyse the consequences
• STEP 2: Analyse the actions
• STEP 3: Make a decision

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