Business Ethics: Decision-Making, Whistleblowing, and CSR

Psychological Tendencies and Unethical Decision-Making

Messick and Bazerman (1996) assert that "unethical business decisions may stem not from the traditionally assumed trade-off between ethics and profits or from a callous disregard of other people's interests or welfare, but from psychological tendencies that foster poor decision making, both from an ethical and a rational perspective." In this summation, the authors argue that unethical decision-making is a product of psychological tendencies. Decision-making does indeed have a great deal to do with the manner in which we think, and within the context of business, these psychological tendencies may impact decision-making more than the incentive of profitability.

The authors also contend that these tendencies can be identified and confronted so that the ethicality and success of decision-making can be increased. They focus on three theories used by executives in the decision-making process: theories about the world, theories about other people, and theories concerning the self.

Theories about the world are associated with the beliefs or standards individuals hold concerning the way the world functions. The theory of the world that one holds influences the decision-making process. For instance, if an executive believes in the spiritual principle that "you reap what you sow," they may make a decision based on how they believe the laws of the universe work.

The second theory purported to influence the manner in which we make decisions involves the theories we hold about other people — specifically, our perception of how we differ from others. "Others" may include a significant number of people: employees, regulators, and competitors. The authors insist that our beliefs concerning others affect our judgment and the decisions we make. In most business settings, decisions made on the basis of such beliefs are readily apparent. For instance, some people are not promoted because managers who make promotion decisions think poorly of an employee or hold preconceived ideas about them based on how they speak or dress.

The authors also assert that theories about the self have a profound impact upon our decision-making. According to the authors, "theories about ourselves lead us to unrealistic beliefs about ourselves that may cause us to underestimate our exposure to risk, take more than our fair share of the credit for success (or too little for failure), or be too confident that our theory of the world is the correct one. If most of the executives in an organization think that they are in the upper 10% of the talent distribution, there is the potential for pervasive disappointment" (Messick and Bazerman, 1996). The idea that our beliefs about the self influence decision-making is accurate. Most people have experienced working for someone who only sees things from their own perspective and does not take into consideration the needs and feelings of others.

Even though people are susceptible to the dynamics that Messick and Bazerman describe, it is apparent that many managerial decisions are still made primarily on the basis of profitability. This type of decision-making is seen across industries and throughout the world. For instance, the financial crisis was created in large part by decisions that financial institutions such as banks and mortgage companies made by placing profitability above common sense and ethics. Many financial institutions were so focused on the financial benefits they received from issuing mortgages that they did not thoroughly consider the ramifications of granting mortgages to people who could not afford them. This behavior is evidence that many decision-makers within the business world still make decisions driven primarily by the prospect of profitability.

The ability to change people's decision-making processes — from one based on the psychological impulses the authors discuss to a more objective process — depends greatly on the individual decision-maker. In some instances, if the manner in which people are making decisions is brought to their attention, they can adjust their thinking so that their decisions are less biased. However, others may make these decisions on a level so subconscious that they will not have the capacity to change their decision-making process.

One system that organizations can put in place is the development of careful screening processes when hiring for managerial and executive positions. Such a screening process would help identify candidates capable of making objective decisions. The best way to handle the situation is to reduce the likelihood of it occurring in the first place — and that is precisely the advantage that such a screening process would provide.

Whistleblowing and the Paradox of Missing Harm

According to Michael Davis's article "Some Paradoxes of Whistle-Blowing," there are three paradoxes associated with whistleblowing: the paradox of burden, the paradox of missing harm, and the paradox of failure. For the purposes of this discussion, we will focus on the paradox of missing harm.

The standard theory of whistleblowing asserts that in order for whistleblowing to be morally permissible, the whistleblower must report unethical activities so that considerable harm can be prevented. That is, whistleblowers feel the need to expose what they know about the management of a business when that management is acting in ways that are not ethical. According to Davis, the term "harm" can encompass a broad number of actions. He also explains that in some cases, whistleblowing occurs in situations where the ethical violations include actions such as deception, injustice, and waste. However, under the auspices of the standard theory, these things do not represent considerable harm.

Davis further argues that in most cases, whistleblowing is not about the prevention of serious physical, psychological, or financial harm. He explains that in some instances, what is referred to as whistleblowing is not actually whistleblowing. He presents the example of the Challenger explosion, noting that one NASA employee informed his superiors the night before the shuttle disaster that the vehicle might explode given the damage it had sustained. His superiors ignored him, and the shuttle blew up. Davis asserts that this was not whistleblowing because the conversation about the danger was held privately among NASA employees. By the time the public knew that the employee had voiced these concerns, the shuttle had already exploded and there was no further immediate danger to prevent. Davis does point out, however, that this employee did help prevent further harm by voicing his safety concerns following the explosion, and he also helped keep the record from being falsified.

Valuing Human Life and Business Cost-Benefit Analysis

Many businesses do indeed have a role in assigning value to human life. This is seen regularly in the airline and automotive industries, where such calculations take the form of cost-benefit analysis. Companies in these industries often weigh the costs of adding certain safety features against the cost of not doing so. The cost of inaction is calculated by estimating how much the company would have to pay in damages if a plane crashed or if people were harmed in automobiles that could have been made safer. If the costs associated with making a plane or automobile safer exceed the costs associated with compensating the families of victims, a company might choose to forego the safety improvement. This is a troubling reality, but many companies view it as one means of maximizing profitability.

In some respects, companies must follow the lead of government or they will not be permitted to operate. There are laws that govern the functions of business, and depending on the industry, there are government standards that must be followed or the company could face sanctions or closure. As it relates to how government handles unethical behavior, however, it is not necessarily a reliable model for businesses. The very nature of government is different, particularly as it pertains to elected officials who are accountable to the public. Because of this accountability, public officials have an obligation to behave in certain ways, and when they do not, they can be impeached or forced to resign. Within the private sector, however, unethical behavior does not always result in resignation or even suspension, because private enterprises are governed by different interests than public institutions.

Works Cited

Dahlsrud, A. (2006). How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management.

Davis, M. Some paradoxes of whistle blowing. Business and Professional Ethics Journal, 15(1).

McWilliams, A., Siegel, D. S., & Wright, P. M. (2005). Corporate social responsibility: Strategic implications. Retrieved November 24 from

Messick, D. M., & Bazerman, M. H. (1996). Ethical leadership and the psychology of decision making. Sloan Management Review, 37.