Description of the Chosen Framework
The ethical framework for making business decisions that I have developed for this task is based on two theories: the utilitarian theory and the rights theory. The utilitarian theory was first introduced by Epicurus of Samos, who claimed that the best and most ethical way to live is a life that produces the most happiness and the least distress to an individual and those around that person. I find this framework to be the most applicable to business for several reasons, which are as follows (Gustafsson, 2017):
- Utilitarianism provides a clear foundation for various policies to be implemented in a company.
- The framework provides a reasonably objective way to resolve conflicts of self-interest.
- Utilitarianism addresses the interests of all four major stakeholders: owners, customers, employees, and the community.
- The framework can easily be explained and understood by all parties, thus making its implementation more tangible.
A rights-based ethical framework, on the other hand, is founded on the notion of protecting the ethical rights of people who are directly or indirectly affected by an action. It is largely formed based on Kantian duty-based ethics and states that all humans have certain unalienable rights such as the right to dignity (Stern, 2015). The reason why I include the elements of this theory in my utilitarian framework is to act as a safeguard against extreme implementations of utilitarianism (McGee, 2014) as illustrated in “The Ones Who Walk Away From Omelas” by Ursula K. Le Guin. In that story, the author criticizes utilitarianism by describing a Utopia whose existence is powered by the suffering of a forsaken child (Crane & Matten, 2016). In other words, obtaining maximum happiness for the majority by way of inflicting major suffering on a minority is unacceptable within the scope of this framework.
Steps for Making Ethical Decisions
Identifying and Recognizing an Ethical Issue
The first and arguably most important step in any ethical deliberation is recognizing that an issue exists. Without that, initiating an ethical decision-making process is largely impossible. In utilitarianism, an ethical dilemma is present in situations where there are more than two possible courses of action and each is capable of producing an estimated amount of good and harm (Barry, 2016). The task set before the decision-maker, thus, is to choose the course of action that produces the least amount of harm and the most pleasure for all parties involved. In situations where actions produce different amounts of good and harm, decision-making may involve ratios. An ethical dilemma is not present in situations where the decision-maker must choose between good and better as the better option would be the obvious and most correct course of action. Choosing between bad and worse, on the other hand, may present an ethical dilemma should the negative effects of a decision affect different parties. In the scope of the chosen framework, the additional factor of rights is also involved as the violation of peoples’ rights also presents itself as an ethical issue. In summary, an ethical dilemma is a situation with two or more potential outcomes, each of which has the potential of bringing good and bad consequences to the stakeholders or of violating their ethical rights (Barry, 2016).
Identifying the Stakeholders Involved
The second step in making an ethical decision within the scope of both the utilitarian and rights portions of my framework involves identifying the stakeholders affected by the decision. It is necessary because, without a clear identification of all relevant stakeholders, any analysis of good versus harm would be incomplete. Knowing the stakeholders will also help in assessing their rights and seeing if any are being violated. Typically, in a business environment, four groups of stakeholders are present: the owners, the customers, the employees, and the community. Depending on the situation, these groups may be affected differently. For example, an internal company issue regarding a particular employee or group of employees may not affect the surrounding community to the same degree that it would affect the employee stakeholder group as a whole.
In contrast, an issue involving ecologically wasteful manufacturing processes in China does affect the community surrounding the manufacturing plant but does not affect the customers in America in the same manner. Depending on the severity of consequences to particular groups, the individuals in those groups may be identified as primary or secondary stakeholders. Other factors that identify the positions of the stakeholders on a hierarchical ladder include the nature of the business as well as the mission and values of the company in question. A shareholder-focused company puts its owners before customers and employees alike, whereas a stakeholder-driven business will consider all parties in equal measure. A rights-based framework will ensure that no matter where the stakeholders are placed on the hierarchical ladder, their ethical rights will be considered in the decision-making process (Stern, 2015).
Gathering Information
The information-gathering process is pivotal to the utilitarian decision-making framework as it relies heavily on information to accurately assess the amount of good and harm that could result from a particular course of action (Weiss, 2014). It is also one of the main weaknesses of the framework as a lack of information or inaccurate information could result in making an unethical decision. As such, consulting all available sources is required before a decision is made. Communicating with all the stakeholders involved will be likely to provide a complete picture of the situation, as well as revealing how the decision would affect every individual party. In terms of ethical rights, less research is required as the rights of individuals are typically set in stone within the scope of this particular framework; this means that information-gathering is required only to identify any rights that would potentially be violated.
Formulating Actions and Considering Alternatives
By the chosen utilitarian framework, formulating actions and considering alternatives will rely on identifying the capacity for good and harm that could come from every individual course of action before making a final decision. Typically, courses of action with the best good versus harm ratios would have priority over decisions with the worst ratios. However, ratios are not the only instrument to use in considering the ethical basis for any business decisions. In some situations, a decision with high margins of potential benefits and harms to certain parties may be undesirable when compared to a less radical but more benign choice that would yield lesser amounts of pain and pleasure.
As mentioned earlier, depending on the situation, stakeholders may be treated differently. However, the general (default) proposed hierarchical ladder of importance is as follows (Weiss, 2014):
- The company. The good of the company is the foundation of any business as, without the organization, there is no business. The good of the company easily translates into the good of every stakeholder involved—the customers, the employees, the shareholders, and the surrounding community. However, by the rights-based ethical framework, the good of the company does not justify intentionally taking advantage of any stakeholder group involved in the dilemma (Weiss, 2014).
- The customers. While the primary purpose of any venture is to provide sustenance for those involved in the process, another aim of the business is to provide customers with quality services for a fair price. Another important aspect of customer-based ethics revolves around treating consumers fairly and being honest about the product (Weiss, 2014).
- The shareholders. The enterprise could not exist without those who own the company. Ensuring the protection of the interests of the shareholders is important for the company. However, these interests cannot be put above those of the customers and the company in general so long as the business remains profitable (Weiss, 2014).
- The employees. This group of stakeholders is responsible for providing services and products to the customers. Without employees, a company cannot function; thus, protecting the employees’ rights and benefits serves the company as a whole. This group is equal in importance to shareholders as both are necessary for the company’s continued existence (Weiss, 2014).
- The surrounding community. Depending on the nature and size of the company, it may have a large impact on the surrounding community. The importance of this stakeholder group varies, and the rights-based framework generally oversees the associated ethical issues. A company is not allowed to profit at the expense of the surrounding community.
While the hierarchical stakeholder structure may change depending on the situation, the provided framework can be used in most scenarios. Based on this framework, the decision-maker should assess the available information and determine which course of action would cause the most pleasure and the least harm to each stakeholder group (Weiss, 2014).
Implementation Phase
After making the decision to choose the best course of action, the decision-maker must carry it out. Acting on an ethical dilemma is often an unpleasant process as causing harm to certain groups of stakeholders, even when necessary, is likely to generate negative emotions. It is important to remain open to communication and to express the reasons for the decision to all the parties involved. Sometimes, a decision will have to be taken back, based on additional facts or information that might come to light during the implementation phase (McGee, 2014).
Reflecting on the Outcome
After the ethical dilemma is resolved, it is important to reflect on the outcome and determine if any mistakes or misjudgments were made. Depending on the severity of those, additional actions may be required to mitigate the negative effects of wrongful decision-making; the aim is to achieve an outcome that results in greater amounts of happiness and the least amounts of grief possible. The strength of the utilitarian model lies in the fact that it focuses on the consequences of actions, which are typically measurable and can be used to determine the effectiveness of an ethical intervention (McGee, 2014).
References
Barry, N. (2016). Business ethics. New York, NY: Palgrave.
Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization (4th ed.). Oxford, UK: Oxford University Press.
Gustafsson, J. E. (2017). Bentham’s binary form of maximizing utilitarianism. British Journal for the History of Philosophy, 26(1), 87-109.
McGee, R. W. (2014). Applying utilitarian ethics and rights theory to the regulation of insider trading in transition economies. Web.
Stern, R. (2015). Kantian ethics: Value, agency, and obligation. Oxford, UK: Oxford University Press.
Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach (6th ed.). San Francisco, CA: Berrett-Koehler Publishers.