Chapter 6 ETHICAL DECISIONS. (Business Ethics) pdf

Business Ethics

1. ETHICAL DECISIONS
Business Ethics
Abdulahi Abukar “ ABAJEY”

2. Introduction
Managers are responsible for all
business operations and they also
make all the important decisions.
Tomakedecisionsethicallycorrect,various
modelsareconsideredforthepurposeofgood
decision-making.Therearevariousframeworksof
decision-makingbasedonfactorssuchasduty,
consequencesandvirtue.Managerialdecision
makinginvolvesdefiningproblemsandthen
structuringthemforpositiveresults.
Abdulahi Abukar “ ABAJEY”

3. ETHICAL DECISION-MAKING
Ethicaldecision-makingisamethodofevaluating
andchoosingthealternativesdecidedbyethics
management.
Managersaffectthebehaviouranddecision-makingcapabilityof
individuals.Theindividualsinanorganizationareresponsiblefor
conductingbusinessoperations.Managementisdefinedasa
decision-makingprocess.
Thefollowingshouldbekeptinmindwhilemakingethical
decisions:
a.Identifyandeliminateunethicaloptionsinthealternatives.
b.Identifycomplex,ambiguousandincompletefactsandtryto
avoidthem.
c.Determinetheethicaldilemmaandresolveit.
d.Selectthebestethicalalternative.
Abdulahi Abukar “ ABAJEY”

4. •Simon Decision-making
Model
HerbertA.Simonplannedamodelfor
decision-makingthatwasknownasthe
Simon’smodelofdecision-making.AccordingtoHerbertA.
Simon,thedecision-makingmodelisbasedonthefollowing
sequenceofsteps.Thesestepsare:
i.Identifyingtheproblem.
ii.Selectingasolution.
iii.Generatingalternativesolution.
iv.Implementingandevaluatingthesolution.
Thismodelhasthefollowingthreephases:
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5. Thescanningofenvironmentmaybecontinuousor
irregular.Forexample,areviewofdailyscrapreportbya
productionmanagertochecktheproblemsrelatedto
qualityconstitutescontinuousscanning,whilefrequent
visitsofasalesexecutivetothekeycustomerstoidentify
customerneedsconstituteirregularscanning.
Theintelligencephaseofthedecision-makingprocess
involvesto:
Problemsearching
Problemformulation
Abdulahi Abukar “ ABAJEY”
Adecision-makergetstolearnaboutthe
environmentwhereaproblemoccurs.

6. Thedecision-makermakesadetailedanalysisofeachand
everyalternativebeforetakingthefinaldecision.
TheChoicePhase
Inthisphase,whichwasdevelopedinthedesignphase,is
selected.Thisselectionhelpsthedecision-makerintaking
appropriatedecisions.Aftermakingadecision,the
decisionisimplemented.
Abdulahi Abukar “ ABAJEY”
Inthisphase,variousalternativesaredeveloped
inordertogetthebestpossiblealternativeto
solveaparticularproblem.
Forexample,thedecisionmakerinthe
choicephasemayrejectallalternatives
andreturntothedesignphasefor
developingnewalternatives.

7. Types of Decisions
Organizationaldecisionscandifferindifferentways,which
initiatesdevelopmentofdifferenttypesofdecisionsfromwhich
organizationscanchoosetheappropriatedecisions.
Organizationaldecisionsareprimarilyclassifiedonthebasisof
the purpose of decision-making.
Anoutcomedefineswhatisgoingtohappenifaparticular
decisionistakenoraparticularcourseofactionistaken.
Organizationaldecisionsareclassifiedintothefollowing
categories:
1.Strategicplanningdecisions.
2.Managementcontroldecisions.
3.Operationalcontroldecisions.
4.Structureddecisions.
5.Unstructureddecisions.
6.Semi-structureddecisions.
Abdulahi Abukar “ ABAJEY”

8. Characteristics of Good
Decision-making
Thedecisionmadebythedecision-makershouldkeephim
inastateofcalm.
Decisionsmadebythemanagementshouldcontributeto
harmonyintheorganization.
Self-interestandself-orientationshouldnotcomeinthe
wayofdecisionmaking.
Abdulahi Abukar “ ABAJEY”
Characteristicsofagooddecision-making
are:
Decisionproblemsshouldbegrabbedby
themanagementbothinspaceandtime.
Thismeans,thedecisionproblemshould
beanalysedthoroughlybythe
management

9. Problems in the
Decision-making Process
Insufficientinformation:Itreferstothelackofinformation
whichaffectstheperformanceandqualityofthemanagement
inanorganization.
Insufficientknowledge:Itreferstothedifferencebetween
availableknowledgeandtherequiredinformationforthe
managementtotakeadecision.
Lackoftime:Itreferstothepressureonthemanagementto
makedecisions.Iftimeislimited,thenthemanagementneeds
totakehastydecisions.
Poorcommunications:Itleadstotheproblemthatarisesdue
toimpropercommunicationofinformation.
Abdulahi Abukar “ ABAJEY”
Therearevariousproblemsfacedbya
managementinthedecision-makingprocess.
Theseproblemsare:

10. Factors affecting Decision-
making
a.Programmedversusnon-programmeddecisions.
b.Informationinputs:
c.Prejudice.
d.Cognitiveconstraints.
e.Attitudesaboutriskanduncertainty.
f.Personalhabits.
g.Socialandculturalinfluences.
Abdulahi Abukar “ ABAJEY”
Someofthefactorsandpersonal
characteristicsthathaveanimpacton
decision-makersaredescribedbelow.

11. Steps in Decision-making
Alldecisionsinvolveaseriesofsequentialstepsthatleadto
a particular result.
Thesestepsaregenerallyfollowedtomakesystematic,
objective,analyticalandunemotionaldecisionsandsome
managementscholarshavecalledthisprocessa‘rational
decision-makingprocess.’Thesestepsareasfollows:
1.Perceptionanddiagnosisoftheproblem
2.Generationofalternatesolutions
3.Evaluationofalternativesandselectingacourseofaction
4.Implementationofthedecision
5.Monitoringfeedback
Abdulahi Abukar “ ABAJEY”

12. Managerial Roles in Corporate
Governance
Anorganizationmustexaminetherolesthatthemanagersare
expectedtoperform.HenryMintzbergdevelopedtheseroles
inthelate1960safteracarefulstudyofexecutivesatwork.
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Themanagersofanorganizationalsoplay
averyimportantroleintheSuccessofan
organizationandcorporategovernance.
Alltheserolesinoneformoranotherdealwith
peopleandtheirinterpersonalrelationships.
Thesemanagerialrolesaredividedintothree
categories.

13. Thesepeopleincludesubordinates,superiors,suppliers,
customers,governmentofficialsandcommunityleaders.
Theseinteractionsinvolvethefollowingthreemajor
interpersonalroles,whichare:
Figurehead
Leader
Liaison
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Interpersonalroles
Managersspendaconsiderableamount
oftimeininteractingwithotherpeople,
bothwithintheirownorganizationsas
wellasoutside.

14. Informationalroles
Byvirtueofhis
interpersonalcontacts,a
manageremergesasa
sourceofinformationona
varietyofissuesconcerningthe
organization.
Inthiscapacityofinformationprocessing,
amanagerexecutesthefollowingthree
roles:
Monitor
Disseminatorofinformation
Spokesperson
Abdulahi Abukar “ ABAJEY”

15. Decisionalroles
Onthebasisoftheenvironmentalinformation
received,amanagermustmakedecisionsand
solveorganizationalproblems.Inthatrespect,a
managerplaysThreeimportantroles,whichare:
Entrepreneur
Conflicthandler
Resourceallocator
Abdulahi Abukar “ ABAJEY”

16. Principles of
Corporate Governance
Corporategovernanceincludesprinciplessuchashonesty,
trust,integrity,responsibility,accountabilityand
commitmenttotheorganization.
Apartfromthese,theotherprinciplesofcorporate
governanceareasfollows:
1.Rightsandequitabletreatmentofshareholders.
2.Interestsofotherstakeholders.
3.Roleandresponsibilitiesoftheboard.
4.Integrityandethicalbehavior.
5.Disclosureandtransparency.
Abdulahi Abukar “ ABAJEY”

17. Corporate Governance
Models
Corporategovernancemodelsarerequiredto
makeanoutlineofthecorporategovernance
structureofacorporation.
Corporategovernancestructureisdeterminedbyvarious
factorsofthecorporation.Thesefactorsaretherightsand
responsibilitiesofdifferentmembersofthecorporation,
internalfactorssuchastheworkingenvironmentandthe
policiesofcorporationandexternalfactorssuchasthecapital
marketofthecountry.
Therearetwodifferentmodelsusedtogovernacorporation.
Theseareasfollows:
Outsidermodel
Insidermodel
Each model for corporate governance
has different participants, corporate
actions, controlling framework and
disclosure requirement..
Abdulahi Abukar “ ABAJEY”

18. Outsidermodel
European countries, such as England,
as well as America, generally follow
the outsider model.
Theoutsidermodelisalsoknownasshareholdermodelbecause
inthismodel,ownershipofthecorporationisdividedamonga
numberofshareholdersofthecorporation.Thus,thefinancial
sectionofthecorporationisdividedamongdifferent
shareholdersofthecorporation.
Theoutsidermodelhasthefollowingfeatures:
1.Aprioritytomarketregulation.
2.Thereisatransitoryinterestinthefirmonpartofthe
owners.
3.Theabsenceofcloserelationshipsbetweenshareholdersand
management.
4.Theprimacyofshareholderrightsoverthoseofother
industrialgroups.
Abdulahi Abukar “ ABAJEY”

19. Insidermodel
MostcountriesexceptEuropeancountriesfollowtheinsider
model.Thismodelisalsoknownasthestakeholdermodel
becausethosepeoplewhohavelong-termrelationshipwiththe
corporationholdtheentirecontrolandownershipofthe
corporatebody.
Stakeholdersofacorporationcanbecategorizedasfollows:
1.Employeesofthecorporation
2.Customersofthecorporation
3.Management
4.Creditors
5.Suppliers
6.Localcommunities
Abdulahi Abukar “ ABAJEY”

20. THANK YOU!
[email protected]
ABAJEY
Abdulahi Abukar “ ABAJEY”