Figure 4 1 Ethical Decision Making Framework EDM

Figure 4. 1 Ethical Decision Making Framework (EDM) – An Overview Preliminary Decision Revised Decision Sniff Tests & Rules of Thumb-preliminary assessment: If this decision were in the newspaper, would I/my mother/my company be proud? /Golden Rule Reassess Problems found Possible problems found Full Ethical Analysis Assessment of/sample questions: Consequences of the Decision (Consequentialism) • • Is it profitable? Does it result in greater benefits than costs? Impact on Rights (Deontology, Justice) • • Is the impact on legal and other rights favorable? Is the decision fair to all? Interest Focus Shareholders Stakeholders Does the decision demonstrate the virtues, character, and motivation expected? No problems found Stakeholders Motivation and behavior implied (Virtue Ethics) • No problems found Stakeholders Note: Relative importance (rank) of each impact must be considered. Final Decision

TABLE 4. 1 EDM CONSIDERATIONS: PHILOSOPHICAL UNDERPINNINGS EDM Considerations Well-offness or well-being Respect for the rights of stakeholders Fairness among stakeholders Expectations for character traits, virtues Philosophical Theories Consequentialism, utilitarianism, teleology 1 Deontology (rights and duties)2 Kant’s Categorical Imperative 3, justice as impartiality 4 Virtue 5 Specific EDM Issues Different behavior in different cultures, (bribery) Relativism 6, subjectivism, 7 Conflicts of interest, and Deontology, subjectivism, egoism 8 limits to self-interested behavior 1. See John Stuart Mill (1861/1988). 2. See, for example, http: //en. wikipedia. org/wiki/Deontology or http: //www. molloy. edu/academic/philosophy/sophia/kant/deontology. htm. 3. See Immanuel Kant (Stumpf, 1988). 4. See Rawls (1971). 5. See Cafaro (1998) at http: //www. bu. edu/wcp/Papers/TEth. Cafa. htm. 6. See, for example, http: //plato. stanford. edu/entries/relativism/. 7. See, for example, http: //academics. vmi. edu/psy_dr/subjectivism. htm. 8. See, for example, http: //www. iep. utm. edu/e/egoism. htm or http: //plato. stanford. edu/entries/egoism/.

TABLE 4. 2 SNIFF TESTS FOR ETHICAL DECISION MAKING Would I be comfortable if this action or decision were to appear on the front page of a national newspaper tomorrow morning? Will I be proud of this decision? Will my mother be proud of this decision? Is this action or decision in accord with the corporation’s mission and code? Does this feel right to me?

FIGURE 4. 2 ETHICAL DECISION-MAKING APPROACHES AND CRITERIA Consequences, Utility Profitable? Benefits > Costs Risk adjusted Duty, Rights, Justice Fiduciary duty Individual rights Fairness, Legality Virtue Expectations AACSB EETF Report, June 2004 Character Integrity Courage Process

FIGURE 4. 3 MAP OF CORPORATE STAKEHOLDER ACCOUNTABILITY Shareholders Activists Governments Creditors Lenders Employees Corporation Customers Suppliers Others, including the Media, who can be affected by or who can affect the achievement of the corporation’s objectives

TABLE 4. 3 FUNDAMENTAL INTERESTS OF STAKEHOLDERS Well-offness The proposed decision should result in more benefits than costs. Fairness The distribution of benefits and burdens should be fair. Right The proposed decision should not offend the rights of the stakeholders and the decision maker. The proposed decision should demonstrate virtues reasonably expected. Virtuosity All four interests must be satisfied for a decision to be considered ethical.

TABLE 4. 4 COST-BENEFIT ANALYSIS: SHORT- & LONG-TERM PROFIT IMPACT POLLUTION CONTROL EQUIPMENT IMPACT ON PROFIT Short. Term Long. Term Total $500, 000 UNIVERSITY ADMISSION SCHOLARSHIPS IMPACT ON PROFIT Short- Term Long. Term Total $600, 000 Benefits (Present Valued at 10 percent) Reduction in worker health costs Increase in worker productivity $200, 000 Improvement in level of earnings of scholarship recipients Total benefits $200, 000 $500, 000 $700, 000 Costs (Present valued at 10 percent) Pollution equipment $350, 000 Scholarships paid Total costs Net benefit-costs $350, 000 ($150, 000) $500, 000 $400, 000 $350, 000 ($400, 000) $600, 000 $200, 000

FIGURE 4. 4 STAKEHOLDER IDENTIFICATION & INTERESTS POWER LEGITIMACY Dynamic Influence URGENCY SOURCES: Mitchell, Agle and Wood, 1997; Rowley, 1997.

TABLE 4. 5 APPROACHES TO THE MEASUREMENT OF QUANTIFIABLE IMPACTS OF PROPOSED DECISIONS* (A) Profit or loss only (B) (A) plus externalities, i. e. Cost-Benefit Analysis (CBA) (C) (B) plus probabilities of outcomes, i. e. Risk-Benefit Analysis (RBA) (D) CBA or RBA plus ranking of impacts on stakeholder’s interests *Optimal decisions usually result from the most thorough approach.

TABLE 4. 6 STAKEHOLDER RIGHTS Life Health and safety Fair treatment Exercise of conscience Dignity and privacy Freedom of speech

TABLE 4. 7 MOTIVATION, VIRTUE, CHARACTER TRAIT & PROCESS EXPECTATIONS Motivations expected: Self-control rather than greed Fairness or justice considerations Kindness, caring, compassion, and benevolence Virtues expected: Dutiful loyalty Integrity and transparency Sincerity rather than duplicity Character Traits expected: Courage to do the right thing personal and/or professional standards Trustworthiness Objectivity, impartiality Honesty, truthfulness Selflessness rather that selfishness Balanced choices between extremes Processes that reflect the motivations, virtues and character traits expected

TABLE 4. 8 MODIFIED 5 -QUESTION APPROACH* TO ETHICAL DECISION MAKING The following 5 questions are asked about a proposed decision: IS THE DECISION STAKEHOLDER INTERESTS EXAMINED 1. profitable? Shareholders’–usually short-term 2. legal? Society at large–legally enforceable rights 3. fair? Fairness for all 4. right? Other rights of all 5. demonstrating expected motivation, virtues and character? Motivation, virtues, character traits and process expectations. Optional questions can be added designed to focus the decision-making process on a particular issue of relevance to the organization(s) or decision maker involved. * This approach is based upon that proposed by Graham Tucker (1990), modified with the addition of specific examination of motivation, virtues and character.

TABLE 4. 9 MODIFIED MORAL STANDARDS APPROACH* TO ETHICAL DECISION MAKING MORAL STANDARD QUESTION OF PROPOSED DECISION Utilitarian: Maximize net benefit to society as a whole Does the action maximize social benefits and minimize social injuries? Individual rights: Respect and protect Is the action consistent with each person's rights? Justice: Fair distribution of benefits and burdens Will the action lead to a just distribution of benefits and burdens? Virtues: Motivation, virtues and character expected Does the action demonstrate the motivation, virtues, and character expected? See Table 4. 7 for specifics. All four moral standards must be applied; none is a sufficient test by itself. *The Moral Standards Approach which was created by Manuel G. Velasquez (1992) is modified here with the addition of specific examination of motivation, virtue, and character.

TABLE 4. 10 MODIFED PASTIN'S APPROACH* TO STAKEHOLDER IMPACT ANALYSIS KEY ASPECT PURPOSE FOR EXAMINATION Ground rule ethics* To illuminate an organization's and/or an individual's rules and values End-point ethics* To determine the greatest net good for all concerned Rule ethics* To determine what boundaries a person or organization should take into account according to ethical principles Social contract ethics* To determine how to move the boundaries to remove concerns or conflicts Virtue ethics To determine if the motivations, virtues and character traits demonstrated in the decision are ethical * Technique proposed by Mark Pastin, The Hard Problems of Management: Gaining the Ethical Edge, Jossey-Bass, 1986, has been modified with the examination of virtue ethics expected.

FIGURE 4. 5 ETHICAL DECISION-MAKING APPROACHES Stakeholder Impact Analyses 5 -Question Pastin Philosophical Velasquez Maximize Profit Consequences, Utility Maximize Utility (Benefits>Costs) Maximize Utility (Risk-adjusted) Duty, Rights, Justice Fiduciary duty Individual rights Fairness Virtue Expectations Character Integrity Courage Process See AACSB EETF Report, June 2004

TABLE 4. 11 A COMPREHENSIVE APPROACH TO EDM Consideration Description Well-offness or Consequentialism The proposed decision should result in more benefits than costs. Rights, duty or Deontology The proposed decision should not offend the rights of the stakeholders, including the decision maker. Fairness or Justice The distribution of benefits and burdens should be fair. Virtue expectations or Virtue Ethics The motivation for the decision should reflect stakeholders’ expectations of virtue. All four considerations must be satisfied for a decision to be considered ethical

FIGURE 4. 6 STEPS TOWARD AN ETHICAL DECISION Proposed Decision Or Action Iterate Identify the facts Identify Stakeholders, Their interests, & The Ethical issues Yes Better Alternative? No Final Decision Ethical Analysis Rank Stakeholder Interests in importance Apply Comprehensive EDM Framework Using a Philosophical Approach Involving: Consequentialism, Deontology & Virtue Ethics And/or Stakeholder Impact Assessment