Abstract
How do business leaders make ethical decisions? Given the significant and wide-spread impact of business people’s decisions on multiple constituents (e.g., customers, employees, shareholders, competitors, and suppliers), how they make decisions matters. Unethical decisions harm the decision makers themselves as well as others, whereas ethical decisions have the opposite effect. Based on data from a study on strategic decision making by 16 effective chief executive officers (and three not-so-effective ones as contrast), I propose a model for ethical decision making in business in which reasoning (conscious processing) and intuition (subconscious processing) interact through forming, recalling, and applying moral principles necessary for long-term success in business. Following the CEOs in the study, I employ a relatively new theory, rational egoism, as the substantive content of the model and argue it to be consistent with the requirements of long-term business success. Besides explaining the processes of forming and applying principles (integration by essentials and spiraling), I briefly describe rational egoism and illustrate the model with a contemporary moral dilemma of downsizing. I conclude with implications for further research and ethical decision making in business.
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Notes
This section closely follows the presentation of integration by essentials in Woiceshyn (2009).
This point is controversial as ethicists have not been able agree that there is a factual basis of moral principles. In contrast to most philosophers, there are some who start from the naturalistic premise that facts about human nature give rise to the need of ethics; that humans need to act according to the requirements of their nature in order to survive and flourish (Foot 2001; Gaut 1997; Hursthouse 1999). Continuing on that premise, others have argued that ethics is like any other science, and that facts can validate moral principles in the same way as they validate or invalidate any other kind of principles (Simpson 2009; Smith 2006).
This happens automatically once a principle has been identified.
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Appendix: A Summary of the Methodology and Findings of the Strategic Decision Making Study (Woiceshyn 2009)
Appendix: A Summary of the Methodology and Findings of the Strategic Decision Making Study (Woiceshyn 2009)
To identify CEOs who were effective thinkers, I asked nine oil industry experts (such as CEOs and investment bankers) in Calgary, Canada to name chief executive officers of successful oil companies whom they considered “good minds” or effective thinkers. Calgary is the location of the second-largest concentration of oil company headquarters in the world. The “oil patch” there is a tightly connected community where most players either know each other directly, or know of each other. I received 72 nominations, 32 of which had been suggested by two or more experts. I asked the 32 to participate in a study of strategic decision making. (The study also involved a comparison group of not-so-effective thinkers. For more details, see Woiceshyn (2009).) Sixteen of the effective CEOs agreed to participate. They either ran or had been recently running successful oil firms, and had a median industry experience of 24 years.
At the beginning of the interview sessions, all the CEOs were asked to read the same, realistic decision scenario where a CEO was given three strategic alternatives (see Woiceshyn 2009) and to think-out-loud how they would deal with it, in order to elicit their thinking processes. The interviews after the think-out-loud procedure included questions beyond the scenario, about the CEOs’ motivation, decision principles, outside interests and backgrounds. The sessions lasted for 90 min on average. Many were followed by phone calls to clarify issues or to ask further questions.
The interview transcripts were coded and then analyzed in several rounds. I first grouped together the interviewees’ comments by the question, then by the similarity of their content. I also conducted a similar analysis of the decision processes through which the CEOs handled the scenario. Patterns of using reason and intuition emerged from these categories of comments and analysis of processes, reinforced by each additional CEO’s interview. For example, it was directly observable from the interview transcripts that the CEOs used various “mid-range” principles. I integrated the mid-range principles into the general principles discussed in the report, and then re-analyzed the transcripts to validate the principles (e.g., by compiling quotations in which the principles were manifested and also by being alert to any evidence contradicting the principles). See Table 2 for examples of the ethical principles used by the CEOs. The notion of spiraling between the conscious and subconscious processing was induced from the effective CEO’s iterative pattern of analyzing the decision alternatives and applying principles.
The model of decision making by integration by essentials and spiraling arose from the iterative contrasting of the transcripts and the summary tables of the effective CEOs with those of the not-so-effective CEOs. The most striking difference between the two groups of CEOs was the process labeled “integration by essentials.” In contrast to the effective CEOs, the latter group did not demonstrate integration: they did not identify many principles and made very few connections between ideas. Although the not-so-effective CEOs did some spiraling between the decision alternatives, they did not do it very systematically, nor did they apply principles to their decisions.
The study received a research ethics certification from my university’s research ethics review board. All participants gave their informed consent to participate.
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Woiceshyn, J. A Model for Ethical Decision Making in Business: Reasoning, Intuition, and Rational Moral Principles. J Bus Ethics 104, 311–323 (2011). https://doi.org/10.1007/s10551-011-0910-1
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DOI: https://doi.org/10.1007/s10551-011-0910-1