Ethical Conflicts in Business

The dilemma of ethical decision making in business settings arises out of the tensions or conflicts between what is good for individuals, organizations, and society. These conflicts manifest themselves in rules that govern organizational behavior and in concrete decision situations.

Individual versus organizational conflicts are apparent when personal values of employees conflict with the requirements organizational tasks. For example, a junior accountant’s audit opinion may be based on ethical grounds. It may be rejected by his or her superiors who do not want to relinquish the business of the client by giving a negative opinion. A salesperson may consider the company policy of giving large discounts or personal gifts to selected customers to attract their business unfair and unethical. A marketing executive may object to company advertisements on the grounds that they are not truthful.

Conflicts between organizational and societal interests arise when corpo­rations consume public goods without paying for them or when they sell goods that may have harmful effects. These conflicts are most common in the areas of environmental pollution and community protection from technological and product hazards. For example, toxic waste disposal practices that are not yet regulated by law may be harmful to the natural environment. International transfer of nuclear waste to poor African countries is a case in point. Many countries, such as Benin in Africa, can more than double their annual gross national product by accepting nuclear waste from advanced industrial countries. Locating of hazardous facilities in communities and manufacturing defective products or products with harmful side effects may be other common sources of organizational-societal ethical conflicts.

Ethical conflicts between individuals and society arise when individuals acting in narrow self-interest harm collective interests. Trading stocks on privileged information is a victimless crime that is detrimental to the collective interests of stockholders and erodes confidence in the financial markets. As businesses have become international, we have seen the emergence of ethical conflicts between societies that follow different ethical standards. For example, giving bribes to officials to expedite work is ethically and legally unacceptable behavior in the United States. In many countries, however, it is an institutionalized business practice to give gifts and bribes to ease the conduct of business deals. Without such facilitation, it is impossible to conduct business. When American companies do business in these countries they face the dilemma of which country’s ethical and legal standards to adopt.

Dealing with ethical conflicts requires that companies establish and communicate ethical standards to their employees. They must create decision making procedures for resolving ethical conflicts. Conflict resolution should involve an explicit set of ethical criteria for making legitimate choices. Today, many companies are instituting ethics programs that provide information on ethical problems managers are likely to face. Some also provide procedures for n-solving ethical conflicts. Broadly, the structure of such programs is as follows:

  1. Identify the organizational, technological, and strategic decision areas that have important ethical dimensions. Examples of these areas include dealing with insider information, managing hazardous facilities and wastes, and avoiding job discrimination based on race, gender, ethnicity, or religion.
  2. For each of these decision areas, describe a procedure for conducting a situational analysis of facts. Such an analysis involves studying the background and history of decisions, identifying the key stakeholders and their stakes, examining decision options and their likely consequences.
  3. Analyze the ethical issues involved using an explicit and predetermined set of ethical criteria. Identify the dilemmas and tensions they pose. Examine moral conflicts, costs-benefits, and accountability-responsibility issues related to the decision.
  4. Choose a resolution strategy for dealing with the dilemmas and conflicts. The choices available to managers are acting on personal ethical values and taking responsibility for consequences, compromising personal ethics with organizational and societal demands, and broadening participation in decision making by inviting other perspectives into the process.
  5. Discuss the approach to resolution with relevant peers, superiors, and subordinates.
  6. Implement the resolution strategy by bringing necessary resources to bear on the situation. These resources could take the form of personal courage, organizational resources, and new decision makers. Implementation also involves learning from the situation and codifying lessons for future use.