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The study of ethics must begin with an understanding of why ethical behavior is an important individual and societal value. In the realm of business, the complexity of decisions that can affect a diverse group of stakeholders has increased both the responsibility for making ethical decisions and the difficulty of doing so. Not every decision rests on moral considerations, but any decision may have an ethical dimension when the full implications of the decision are realized.

Learning Objectives

By the end of Lesson One, you should be able to:

1. Appreciate how ethical issues differ from other types of decisions.

2. Discuss the limited usefulness of rules such as laws or codes in managing issues in ethics.

3. Explain how stakeholder interests create ethical dilemmas.

Content

How Ethical Dilemmas Arise in Organizations

There is no question that ethics has become a more visible concern for organizations engaged in transactions with the public today. During our work together in this course, we will see how that concern has created a need for a new understanding of decision-making within organizations.

It used to be safe to generalize about the fact that nonprofit organizations had a heavier burden of public accountability than for-profit businesses. However, in the wake of dramatic and damaging scandals among corporations such as Enron, Arthur Andersen, and Tyco, among others, it can fairly be said that all organizations must take very seriously a public expectation of ethical behavior.

At the same time, nonprofit organizations have had to commit themselves to sound business practices and profitability (in spite of the myth that nonprofits do not work to make a profit, they must in order to survive). They share with for-profit entities an environment in which competition for public support demands efficient and cost-conscious operation. Moreover, they are measured by the same quality measures, in terms of their ability to achieve positive outcomes, as the proof of product/service quality.

As a result of these dynamics, both for-profit and nonprofit entities find themselves in conflicts between what can be called their "business interests" and a demonstrated commitment to "socially responsible behavior." The difficulties that arise when these two obligations conflict (they can and do become ethical dilemmas) since it is often not possible to accomplish one without compromising the other.

Leaders and managers of organizations are faced with and make many decisions every day. It would be hard to convince one of these decision-makers that every one of those decisions has moral significance; yet, it is very likely that this is the case. It becomes easier to see this when we realize that deciding what course of action represents "the right thing to do" depends on what you wish to achieve.

When a decision-maker is faced with balancing the outcomes. Even more to the point, when a decision is made that appears to be nothing more than a "business decision," more often than not its moral consequences follow along after. Whether or not they were anticipated and thought through in advance, the results are the same.

Sources of Ethical Concerns for Organizations

Some of the areas of concern in which ethical dilemmas typically arise for stakeholders in organizations include:

· The theory and practice of capitalism

· Current and emerging issues, often arising with the rise of new technologies

· Human resources

· Consumer issues

· Public accountability and reporting

· International operations and the global economy

· Environmental policy

· Community impact

In all of these areas, ethical issues are seldom a clear-cut choice between right and wrong. If the right thing to do were immediately apparent, we would have no dilemma. Rather, an ethical dilemma arises because we have two equally valid courses of action that we can take on a question before us. Each alternative is more or less reasonable and obvious to different people. Therefore, we can characterize ethical dilemmas as arising when different people would reach different conclusions about what is moral under the circumstances. In addition, there is some urgency in the situation that calls upon a decision-maker not only to "do the right thing," but to do it quickly.

In short, ethical dilemmas arise when a choice must be made between alternative courses of action because we cannot do both, however strong the arguments for each course of action may be.

This is not to say that ethics is a new and recent concern for business; on the contrary, many of the largest and oldest corporations have reflected their commitment to ethical business practices since their founding. There is also no question that government regulation of business practices and the laws that govern many of the areas cited above have been part of doing business in America since the founding of the country. Leaders do suggest, however, that increasing complexity can make those commitments more difficult to honor, for both individuals and organizations, as well as for the government constituted to benefit them.

As individuals and groups experience growing complexity in their lives, choices become much less clear-cut, and ethical dilemmas arise that are not easily answered by mandates from a simpler time. A long and growing catalog of codes, laws, regulations, protocols, policies, and procedures competes for attention from organizations also pressed to achieve business goals in highly competitive circumstances. Add to these opposing forces the growing complexity of them both, and the multiplicity of "rules" functions less and less as a source of guidance and direction for organizations. In fact, it is these mounting pressures and increasing complexity that make the likelihood of reaching universally acceptable solutions, or even easy answers in laws, regulations, and codes of ethical behavior, even more remote.

Managers and leaders must take account of the divergent interests of various stakeholders in any issue, and often on a global scale. They must make decisions that may or may not serve these stakeholders as they would wish to be served. How can organizations today make the decisions they need to make, and not become paralyzed by the constant dilemmas?

Why Is Making an Ethical Choice Important?

This notion of stakeholder interests begs the question of why it is important to make ethical choices. Why can't we just toss a coin when we have two irreconcilable courses of action and must choose to follow one, at the expense of the other?

The stakeholders in any situation are those individuals or groups who will be affected by the choice that is made. They may or may not be directly involved in making the decision. They may not even know it is being made. Nonetheless, the decision-and the way it is made-will have consequences for them, for good or ill. For instance, decisions made by senior management in any organization can affect people in the organization, consumers, businesses affiliated with the organization, "the competition," the community in which the organization is located, and many others.

It is a manager's responsibility to make a business decision by taking account of various stakeholder interests. The stakeholders themselves may or may not be "at the table" to advocate for their own interests. Nonetheless, the decision will have consequences for them. A manager must anticipate those consequences in order to make an ethical decision.

But what is the measure of an ethical decision? At the heart of every ethical dilemma lies a fundamental question: "Just because we can do something, does that mean we should?" The discipline of ethics arose in the history of philosophy when people became capable of imagining something new, and then making it happen. The intervening step-considering what it would mean to "make it happen" before we actually do so-is the "reflective" moment when ethical concerns are dealt with.

Sometimes, our ability to foresee all the consequences of "making it happen" is limited. This is often the case with new technology and its consequences for people. The dynamic is the same, whether we simply cannot see the consequences of the actions we contemplate, or choose not to.

The study of ethics assumes that responsible decision-making requires decision-makers to make every possible attempt to think through in advance whether the actions being considered reflect the values we wish them to reflect. Often, the stakeholders who will be affected by those decisions raise the ethics debate to a full-blown view of all the interests and complexity involved.

What has this to do with ethical dilemmas that arise for people in business and their organizations? In the effort to do their best for stakeholders in the organization, they find themselves pulled in opposite directions by the opposing interests of those stakeholders. We will be exploring how differently those stakeholders understand where their "best interests" lie, and how complex are the dilemmas that arise for managers as a result.

Summary

We set the stage for studying ethics by noticing situations in which, the more closely we look at them, the complexity of issues becomes greater and the interests of stakeholders in a situation become more diverse. Ethical dilemmas arise when it is possible for people to decide differently about the right thing to do. As important as the rules of ethical behavior are, they may not suffice as the only guide for decision-making when managers and leaders in the field are faced with other alternatives. Keep in mind what it means to be standing at a crossroad, where only one course can be followed. This will help you understand the significance and the difficulty of handling ethical dilemmas.

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